Case Study: Creating a Decisive Competitive Edge in Commercial Lending

by: Neil Hartman and Joel Graves

With a legacy of helping customers meet their financial needs, Midland States Bank sought to increase commercial loan throughput while decreasing risk. By decreasing the time elapsed between the point of beginning a commercial credit application and the point of making funds available to customers, Midland aimed to further improve customer satisfaction and close on even more loan opportunities, thereby creating a decisive competitive edge in commercial lending.

Combining lending knowledge, systems experience, and proven methodology.
Midland selected West Monroe Partners based upon its positive track record in managing projects and programs successfully in the past as well as its blend of knowledge in commercial lending, experience with commercial credit management systems, and a proven methodology.

Enlarging the view.
As we often observe, a key assumption heading into the project, albeit implicit, was that selecting and implementing a third-party commercial credit management system would significantly diminish the limitations of the existing commercial lending process, which impeded loan throughput.

Relying on our experience, we partnered with Midland to emphasize the need to change the rules that recognized those limitations. Only in doing so could we capture the benefits of implementing a third-party commercial credit management system. For example, while historically various groups across the commercial lending process measured and managed local efficiencies, the organization as a whole had not measured and managed the total duration of loan originations or renewals across the entire commercial lending process (i.e., the point of beginning a commercial credit application through the point of making funds available to customers). By enlarging the view, the project team was able to ensure all decisions made throughout the project were consistent with achieving the goal.

Shifting the focus.
Consistent with this enlarged view, the project team shifted the focus to changing policies, procedures, and people as much, if not more, than it did on configuring or customizing the system. With rapid growth into new markets and a shifting regulatory environment, Midland faced several constraints across its commercial lending process, including managing the flow of documents across several geographically dispersed areas, fulfilling an extensive list of compliance requirements, and communicating critical credit information and approval decisions quickly across groups and areas.

Often, just a few constraints or bottlenecks can limit the throughput of such a process at any given time—i.e. the “weakest link” concept. The project team pinpointed those constraints and made appropriate changes to policies, procedures, and people. For example, the role of reviewing and validating all compliance requirements in order to close a loan was moved up much earlier in the process to prevent rework and delays downstream, which decreased the duration of loan originations and renewals.
Additionally, the project team modified the way in which critical documents were gathered, indexed, and made available electronically for use across the groups and geographic areas. Previously, documents were not available electronically for use until they had been pushed into a queue and indexed centrally, delaying critical downstream activities that are dependent upon those documents, such as underwriting. By elevating this constraint and changing the procedure so that the documents can be pulled into an electronic document management system, the bank further decreased the amount of time required to originate and renew loans.

Increased commercial loan throughput becomes a decisive competitive edge.
By enlarging the view of the project and shifting the focus to the limitations or constraints of the existing process, rather than simply implementing a commercial credit management system and overlaying it on the existing process, Midland was able to position itself to increase loan throughput while decreasing risk. As it continues to refine the management reporting offered by the commercial credit management system, and with a continued eye on constraints or limitations of the new process, Midland is well positioned to increase customer satisfaction and create a decisive competitive edge in commercial lending.

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