Mistakes in Manual Mode
Why Excel is Killing Your Lending Business
By Erica Sikoski
When just starting out in the private lending industry, it takes time to build up your portfolio of clients, partners, and service providers. Spending money right out of the gate on a new software solution seems like a far off goal. So, when new private lenders are starting and have limited resources, Microsoft Excel seems like the perfect software solution for all aspects of your business.
At first glance, Excel is a well-known tool among employees and appears capable of managing your customer data, creating formulas for quick calculations, and keeping all information in one simple spot. Plus, it’s free! Perfect, right? It’s not that simple. When your pipeline grows, you will start seeing holes in this solution, your business will require more scalable tools, and there will be roadblocks where you should be seeing tremendous growth.
If you are already at the point where Excel is no longer working for your organization or you’re a new private lender just getting started, consider this your push to find the perfect software solution now. Here are three reasons why you should switch from Excel to a proper Loan Origination System.
Common Excel Drawbacks
Lack of Team Collaboration & Sharing Capabilities
The ability for private lending teams to collaborate in Excel is very limited. Of course, the Excel file can be emailed back and forth, saved, and reopened by different users, but there is no real-time collaboration, as you cannot have more than one team member in the file at the same time. This also enables the Excel file to become outdated very quickly resulting in team members working off outdated information. Additionally, it becomes difficult to divvy up leads and clients when you’re working in Excel, as there can be overlapping messaging and missed lead opportunities.
As hard as Excel spreadsheets are difficult to share internally, they are too easy to share externally. As opposed to a secure software that requires users to log in to gain access and only allow certain members to view full client information, Excel spreadsheets can generally be circulated to anyone by simply clicking the send button of an email. As private lenders are typically storing client and deal information in these Excel spreadsheets, this can leave your entire pipeline and leads list open for misuse. It’s important to keep your clients as you’ve put in the work to earn them.
Manual Data Entry Allows for Errors
Excel can be used for a wide range of formulas and calculations, but all this data must be entered manually. Just entering and updating customer data becomes incredibly time-consuming and you’re opening the door to human errors. This human error can lead to costly mistakes. In 2012, JP Morgan lost over $6 billion in what’s known as the “London Whale” incident due to Excel spreadsheet errors. In this case an employee copied and pasted data from one Excel sheet to another but with notable errors that were not caught until it was too late. Don’t let your private lending business become another statistic like this.
Scalability
Once your business starts to grow, the Excel spreadsheets will need to grow as well. However, the bigger and more cumbersome the spreadsheets, the more likely they are to contain errors. Also, as your client base grows, it will become difficult, if not impossible, to track, make notes on, and conduct appropriate follow-up with these clients. This can lead to missed opportunities and dead files.
You might have heard the expression “What got you here, won’t get you there” and running your private lending business on just Excel is the perfect analogy.
With so many “all encompassing” software solutions and platforms readily available to the private lending industry, it’s important to consider which software features of Loan Origination Systems and CRMs (Customer Relationship Management) are crucial for your business to succeed in the long run.
Important Software Features to Consider
Cost & Implementation
When purchasing any software, it needs to be viewed as an investment. Especially going from the free cost of Excel, the upfront pricing and subscription fees will be offset by the improved efficiency, productivity, and organization your private lending business will achieve. Compare the software solutions and make sure the cost of the service not only fits into your budget but will work with the size of your team and current workflow. Keep an eye on the differences between the number of users and features to ensure you’re getting the most for your team at a reasonable price.
In addition to start-up and subscription costs, consider the implementation and training costs as well. New software solutions always have a learning curve. Spending months learning a new software, even for the right price, can bring your business to a grinding halt. The missed months of business may not be worth the time spent onboarding your lending team. Remember, that software is an investment, and needs to be evaluated like one.
Cloud-based & Integration Options
Cloud-based software applications make life and business much easier, as everything is accessible to the entire team. When working on a loan file, instead of storing each document on different computer desktops, store the documents in the software itself which enables multiple people to work on the same loan file and share documents, client info, and lending terms all in the same platform.
Additionally, keep an eye on which of the software providers makes their Application Programming Interface (API) public, which allows for the expansion of your possibilities to integrate with service providers, marketing platforms, and more. Ask about the current providers each software solution is already partnered with and the process of integrating with any partners your business is currently working with. This includes credit and background solutions, appraisal management companies, referral marketplaces, etc.
Integrating disjointed software solutions is one of the most common challenges businesses are currently facing. Most applications are not connected with each other, resulting in little islands of data not easily accessible to team members. Being able to share lead and client data between applications streamlines your workflow.
Data Security
Data security is the most important factor to consider when shopping for a new software solution. Ask your potential software providers these questions upfront:
» How is my client information protected?
» Who has access to my clients and loan files?
» Who can upload information and documents into the system?
» Can my clients log into the system, and what can they see and do?
Loan Origination Systems and CRMs are designed to protect your information, especially in comparison to only using Excel for data entry. Using a software that requires users to log in with their specific email and password adds an extra layer of security to your valuable client, lead, and sales data. Many software solutions also enable you to go one step further and set permissions for what each user can view and modify within the system. And when an employee leaves your company, simply deactivate them as a user, transfer their pipeline to your other team members, and rest assured that your data is secure.
When it comes to running your private lending business, traditional Excel spreadsheets can seem like a good starting place for a new, small company, strapped on cash. As your business grows, using Excel as a Loan Origination System or CRM becomes increasingly difficult, if not entirely impossible.
Loan Origination Systems and CRM software solutions offer a better way to manage client data, lead lists, and pipelines. They also make it much easier to share data across teams and applications in a secure and easily accessible format.
These features will not only improve your private lending business’s efficiency but will ultimately help improve your bottom line.
