In this example, a bank, let’s call them First Federal, is a commercial construction lender with a $500M portfolio. They manage dozens of loans and the deluge of administrative tasks related to draw requests. For example, within a single draw disbursement request submitted to First Federal, a general contractor pulls together 100's of legal and compliance-related documents including lien releases, invoices, the AIA G702, the AIA G703, receipts, change orders, inspection reports, approvals, and more. Each draw request requires the approval of several parties including but not limited to the loan administrator, third party inspector, title company, and other loan participants. The entire process applies to individual loans as well as an entire portfolio of loans and is core to construction loan management.
In the modern world, there is no more need for borrowers to wait months for their draw requests to move through the construction draw process before receiving payment. Just as there is no need for construction loan manager at the bank to lose sleep over handling the paperwork and monitoring the ins and outs of construction loan management. Construction loan software fast tracks much of the work currently done manually.
Imagine that instead of biting your nails for five days (or is it nine days) manually reviewing and approving a construction draw request, you can do it half the time. Given the fact that saving time and money is the name of the game, construction loan software aims to eliminate the need for various tasks associated with draw processing using machine learning and process automation. By allowing construction loan management technology to take on the mind-numbing workload, commercial lenders see reduced loan servicing costs, fewer incidents like short pays or overpayments, and an increase in lien-free completion of projects. Oh, and they're able to process draw requests in half the time.
Team Contract Simply enjoyed a few days in San Francisco attending the 2018 LendIt Fintech Conference. In addition to meeting 100’s of lenders interested in construction loan management software, we had a chance to announce a new partnership and attend a few amazing sessions.
In a “sunshine and rainbows” world, construction contractors do a stellar job, their draw request is approved, and lenders pay up - everyone is happy for the rest of time. Alas, as we all know, this is not always how construction loan management goes ‘round, and often both lenders and general contractors find themselves in a pickle with a contractor due to a late payment or slow payment processing. The pickle, in this case, is called a Mechanic’s Lien.
Modern technology aims to simplify all processes and aspects of human existence. And the tasks associated with managing the construction draw process are no exception. Given the fact that the construction draw process has been a decades-long time-consuming challenge for lenders and borrowers, construction loan software aims to simplify and speed up the process by automating various processes and allowing relevant parties to monitor the project in real time.
Although post-closing management of construction loans is an area ripe for game-changing process improvement, it has been largely underserved by technology. There are many variables in construction loan administration including draw processing, review of AIA G702 and AIA G703 forms, borrower to contractor payment and lien release processing, and a million other details. Much of the work is done manually and it's a lot for both construction loan administrators and borrowers to juggle. Enter FinTech and construction loan software for commercial lenders and real estate developers.