The relationship between a borrower and bank does not end with the disbursement of a loan. After funding has been secured, a commercial banking officer works closely with his or her back-room operating unit to make sure loans are processed correctly.
“If the loan isn’t being handled properly, there are all kinds of ramifications that will carry through to the financials of a company,” says Carol Malecha, vice president of loan servicing for MB Financial Bank in Chicago. “They could have their loan not accrue correctly, they could be faced with an incorrect payment or they could be reporting incorrectly in terms of their liabilities and assets.”
Smart Business spoke with Malecha about what business owners should know about the treatment of their loans, what happens at the bank after a loan is approved and the importance of communication among a bank’s operating units.
Beyond interest rate, what should business owners know about the treatment of their loans?
After everything is signed, sealed and delivered, customers need to know that their loan is going to be treated with the respect that it was treated with when they were taking out the loan. Customers should ask what their bank does to ensure that there is quality processing. Is the operating unit on board with the philosophy of relationship banking? A banking relationship should be customer focused, not operationally focused. This should be evident from the origination of the loan to the payoff of the loan.
After a loan is approved, what happens at the bank?
After a loan is approved, the operating unit gets the original, signed documentation. Then the loan is keyed into an operating system, called the host system. The loan will get boarded with the proper interest rate, the proper term, the proper accrual, the proper billing instructions, etc. Once it is in the system, the bank processes the loan payments and disbursements through the life of the loan. This can be done in several ways: through account officer contact or through item processing where the payment stub is sent with the payment. There are many touch points in the bank that have to work in harmony to provide the quality service every customer should expect and demand.
What role does a bank’s internal communication play in the loan process?
An operating unit communicates with internal customers more than external customers. For businesses to run seamlessly, there needs to be open communication among the account officers, commercial banking associates and consumer lenders. For example, with complicated attorney-prepared documents, there has to be open communication from the time the credit is reviewed through the loan documentation events because all of the terms of the loan have to be clarified in order for the loan to be put on the books correctly. A customer should ask for examples of how his or her bank’s operating units communicate with each other because this is very important. The more open the communication and straight-through the processing, the greater
the efficiency and quality of the service.
Who at the bank should business owners be in contact with?
If it is a commercial relationship, a business owner should be in contact with his or her relationship manager, commercial officer or commercial officer’s associate. This makes the most sense because a relationship is already established; they know each other and they have developed a rapport so they understand what needs to be done. In turn, they will communicate with operations on behalf of the customer. The goal is to ensure that there is a common understanding of the loan on the back end, ensuring the loan is managed in compliance with the terms of the agreement.
What problems can come from banks that sell loans to the secondary market?
Loans to the secondary market do not have an impact on the customer. The relationship between the selling bank and the secondary lender — whether it be Fannie Mae, Freddie Mac or another lender — is between the bank and lender and does not affect the customers at all.
What steps can a company take to fully leverage its bank’s products and services?
The best thing companies can do is develop a personal relationship with their account officer or relationship manager. They’re the professionals who know the most about what the bank can and cannot do. There is a wide variety of products out there other than loans that can help a business, including new electronic processes and online banking. A relationship manager should be aware of these offerings and if his or her customer would benefit by taking advantage of additional products.
CAROL MALECHA is vice president of loan servicing for MB Financial Bank in Chicago. Reach her at (847) 653-2885 or firstname.lastname@example.org.