Most lenders think their loan software can handle everything from loan origination to loan servicing. And for standard loans, it works fine. But what if your lending process does not fit the way the software works?
In that case, your team finds ways to get things done.
For example, a loan officer approves a loan in the system, but calculates the fees in Excel for disjointed system. A manager approves an exception over email, and someone manually updates the loan record. The loan closes, and everything seems fine.
A few months later when a compliance team, auditor, or borrower asks how the fee was calculated or who approved the exception, your team may have to go through spreadsheets and old emails just to find the answers. These delays waste valuable time, create compliance risks, and could result in regulatory penalties or fines.
That's when you start noticing the limitations of off-the-shelf loan software, and it raises a question worth asking now: Is your loan software supporting the way you lend, or is your team constantly finding ways to work around it?
Why Off-the-Shelf Lending Software Assumes Every Lender Works the Same Way
Off-the-shelf loan software often comes with workflows for certain types of loans. There will be certain assumptions about repayment schedules and loan structure. If your company lends typical loan products, then your assumptions probably align with your loan software.
However, if your company offers bridge loans with interest only payments, extensions and varying maturities or if your company specializes in equipment finance with unique payback schedules, your rules and assumptions about the loan may differ from your loan software.
4 Signs Your Lending Workflow No Longer Fits Your Software
Not every software problem comes from growth. A lending operation can outgrow its loan servicing system as volume rises, but the signs below point to something different: a lending model that works differently than your software expects.
Some are easy to miss because your team has gotten used to working around them. Here are four to watch for.
Fee Calculations Done in Spreadsheets Instead of the System
Maybe your loan software doesn't allow you to calculate extension fees. You may need a different day count convention for your loan software. Perhaps you have different late fees for each type of loan; your software only has one formula.
Using an excel sheet is helpful to bridge the gap. That may work for an occasional exception. But what happens when the spreadsheet becomes part of your normal process?
The loan record now shows the final fee without explaining how it was calculated. If a borrower questions the amount or someone needs to verify it later, your team has to find the original spreadsheet and reconstruct the calculation.
Loan Data Stored in Fields Built for Something Else
"Other charges" field is used to store extension fees. Then there is a note field that contains special loan repayment conditions. It's fine because your team knows what the field means.
But what if your other employees don't know? What if they interpret these fields differently?
An extension fee recorded under "Other Charges" may be treated as a different type of fee or missed in a report. And if important repayment conditions are buried in notes, another employee may not know to check them before processing a payment.
The information exists in your system, but it is not stored in the way that reflects how your lending business actually works.
Exception Approvals Tracked Only in Email
What if a commercial loan needs to be approved when its loan-to-value (LTV) ratio is over a certain number? Your loan software supports workflow automation for standard approvals, but this loan needs another set of eyes and a different approval process.
The underwriter sends an email requesting approval. Once the credit manager responds, the underwriter manually changes the application's status.
Now that loan has been approved, but does your software show who approved it and why? Without an audit trail, the exception, the approver, and the reasoning live only in someone’s inbox.
Your loan origination workflows should follow the lender’s decision rules and track exceptions for each application, if any.
Commercial Lending Products Your Software Wasn’t Built For
Let's say you are offer construction loans. This type of loan requires multiple disbursements as the project reaches different milestones. Each draw may require an inspection, supporting documentation, and approval before funds are released.
But what if your loan software only supports a single disbursement and doesn't have a way to manage construction draws?
Your team may end up tracking draw requests, inspection results, and available funds in spreadsheets. Approvals happen through email, and only the disbursed amounts are entered into the loan system.
The software may show how much has been disbursed, but it doesn't capture the complete process behind each draw. Anyone reviewing the loan must look outside the system to understand which milestones were completed, who approved the releases, and how much remains available.
The same problem can arise with bridge loans that require unusual repayment structures or loan syndication arrangements involving multiple lenders.
This is where commercial lending teams can run into limitations with outdated software. Modern lending requires systems that can support the terms, workflows, and complexity of the products being offered.
The issue isn't that your team processes too many loans. It's that your software wasn't designed to manage the terms and workflows your lending products require.
Why Lenders’ Temporary Workarounds Can Become Permanent
At some point your company had to create a workaround.
They offered a new loan product and their loan software couldn't calculate a fee. Your operation employee created an excel sheet to solve the problem.
It helped the company out. Now other employees have been using that excel sheet. They may have added another calc to the sheet. It became the norm for calculating fees.
No one wants to change it because the person who created it understands rules that are not documented anywhere else.
Part of the reason it sticks is that it never breaks in an obvious way. Fees still get calculated and loans still close, so the workaround looks like it’s doing its job. The cost only shows up when something changes: the person who built it goes on leave, two versions of the sheet start circulating, or a borrower questions a fee and no one can show how it was calculated.
What started as a quick fix is now a process that depends on one employee and one spreadsheet. The same pattern can show up in underwriting exceptions, approval workflows, payments, and servicing.
At that point, the workaround isn’t supporting your process. It is your process, and it’s running outside the system you rely on to record it.
Why You Should Not Manage Lending Decisions Outside Your System
If you complete lending activities outside of your system, you lose visibility about loans.
Having these key functions happen outside of your loan system will leave you with more work to piece together the life of the loan.
Before You Replace Your Loan Software, Identify What Doesn't Fit
If you notice some of these things happening, it does not mean that you need new software. You should first find out what these issues are and why your team is so dependent on workarounds.
Here are some questions to ask your team:
- Are we able to create different types of loans with interest, repayments and fees?
- Can we create approval workflows for certain loans based on criteria?
- Can our employees input exceptions/overrides to a loan?
- Is our loan servicing system capable of extending or modifying a loan and applying special terms to it?
You may find that these can be resolved by customizing your software or better educating your employees.
Other issues may stem from your software being limited. Knowing what type of issues you are running into will help you when deciding if you need to replace your software.
Make Your Lending Software Work the Way You Lend
As a lender, there are many different aspects that you should be able to customize in your loan workflow software: customizable loan products, approvals, fees, exceptions, and a way to keep track of all this.
Before you decide to switch loan workflow software, take a look at what workarounds you may have in place.
What workarounds are you using because of your type of lending? What workarounds are you using because you haven't found an easier way to use your current software?
Separating those two lists is the next step. Our guide to “What to Do When Your Lending Model Doesn't Match Standard Software” walks through how to tell which parts of your lending model are genuinely non-standard.
cmLending offers a Salesforce-native platform that covers your loan origination, servicing, syndication, and leasing with configurable workflows. The goal is to keep all lending activities within a connected system.