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Writer's pictureStefan Celeski

Document Collection Roadblocks: Why Lenders Are Struggling

Private lending businesses know their document collection processes are a critical area ripe for innovation. Plagued by inefficiencies, cumbersome procedures, and borrower frustrations, lenders need a new way of collecting and managing information that adapts to the unique needs of every commercial client and project. 


Jesse Darrow, Vice President of Lending at PHD Financial, knows that the future of commercial lending lies in balancing relationship-building with process optimization. In this Q&A, he explains the current state of document collection and suggests how the industry can shift toward new methodologies to ensure faster closings and happier borrowers.


Explain how PHD Financial serves the private lending market.

We specialize in boutique investment banking focusing on private lending and commercial real estate financing. Based in Florida, our reach extends across all 50 states and internationally, allowing us to serve a diverse clientele with complex lending needs.


As the head of our loan processing and real estate advisory team, I’m directly involved in originating loans and managing our underwriting processes, particularly document collection. My goal is to ensure our loan packages meet strict standards, increasing both speed and accuracy in securing approvals.


What are the top challenges in document collection and underwriting processes today?

Document collection is a foundational yet challenging part of loan processing. Inefficiencies persist across the board, from loan officers to lenders and even borrowers.


A robust document package is crucial to a loan’s success. Even well-qualified projects can be denied due to incomplete or slow submissions. Document collection is complex, particularly for commercial loans that require extensive financial analysis and documentation based on the business type, loan purpose, and other factors. Ensuring that each document is relevant, complete, and formatted correctly is essential—but rarely easy.


Here are the most significant challenges we encounter:


Failures by loan officers

  • Last-minute requests: Loan officers often wait until the last minute to ask borrowers for critical documents, creating unnecessary delays.

  • Lack of document reviews: Documents submitted to underwriters are sometimes incomplete or incorrect because loan officers don’t check them thoroughly.

  • Guideline gaps: Some loan officers aren’t fully informed about their bank’s lending guidelines, resulting in wasted time on ineligible deals.

  • Limited borrower guidance: Many loan officers expect borrowers to know exactly what documents they must provide and in what format. This unrealistic expectation confuses and slows down the process.


Failures by lenders

  • Unclear credit criteria: When loan officers aren’t updated on changing credit criteria, they end up working on deals that aren’t viable.

  • Underwriting bottlenecks: With limited staff, document review and loan approvals are delayed.

  • Lack of accountability: Delays in processing are often exacerbated when staff aren’t held accountable for mistakes or inefficiencies.

  • Process rigidity: Some lenders resist simplifying or consolidating paperwork, making it hard to improve the speed of loan approvals.


Failures by borrowers

  • Disorganization: Borrowers frequently struggle to gather necessary documents like financial statements, bank statements, and proof of insurance in a timely manner.

  • Procrastination: Many borrowers delay ordering required items like title work or business licenses, which can take weeks to process.

  • Unrealistic expectations: Lack of familiarity with the loan process means borrowers often expect quick turnarounds and do not understand the time needed for thorough document collection and review.


Get efficient and accurate document collection.


How do these inefficiencies impact the broader workflow, from document collection to loan approval?

Delays in document collection trigger a chain reaction that affects the entire loan process. Missing documents or outdated information cause significant setbacks, especially for time-sensitive loans. Here’s how these inefficiencies trickle down:


  • Expired documents: Financial documents must be recent, so if an underwriter receives outdated or incorrect materials, they must request updates, resulting in a longer loan timeline.

  • Lost deals: For time-sensitive loans—like property purchases—any delay can jeopardize the deal. If a borrower misses a closing deadline, sellers may refuse to extend, potentially killing the transaction.

  • Additional costs: Prolonged processing times lead to higher costs for all parties, which affects customer satisfaction and lender profitability.


How do these inefficiencies impact borrower experience and overall business performance?


When a loan takes longer than expected to close or incurs last-minute requirements, borrowers are understandably frustrated. Too often, loan processors don’t request time-consuming documents until the very end, which could have been addressed weeks earlier. These delays can force borrowers to scramble for documents and force longer timelines.


On the borrower side, some clients hesitate to start gathering documents promptly, which compounds the issue and slows down the process further.


These delays don’t just impact borrowers emotionally; they can also hurt overall business performance. When borrowers experience delays and inconveniences, their trust in the lender diminishes. This makes it less likely they’ll return or recommend the lender to others, impacting the lender’s reputation and, ultimately, growth.

What is an example of a document-related inefficiency that causes delays or financial repercussions?


At PHD Financial, we prioritize eliminating inefficiencies to provide a seamless lending experience. However, I can draw from personal experience what borrowers often encounter with other lenders. Years ago, I applied for a loan with a well-known national lender to purchase a rental property. Despite their size and reputation, the process was disorganized from start to finish. The loan officer repeatedly requested the same documents, often misplacing or misunderstanding submissions. They even made me redo forms I’d signed digitally because they later realized they needed handwritten signatures. After initially approving the loan, they then denied it due to their own error, only to reapprove it after I identified the mistake.


This was a firsthand look at the impact a poorly executed document collection process can have, even with a well-qualified borrower and project.


How critical are technologies like AI and automation for improving document collection and transforming the underwriting process?

AI will change the future of commercial lending. While residential lending is relatively simple and has already seen improvements, commercial lending is far more complex and requires intelligent analysis beyond simple checklists. Imagine a future where a borrower could log into a portal, sync their financial accounts, and have the system automatically analyze cash flow, credit status, and eligibility without human intervention. 


While residential financing platforms already use similar technology, the leap to commercial lending would be revolutionary.


What are some lenders reluctant to adopt these technologies?

Adoption barriers in commercial lending largely stem from an ingrained resistance to change – you can’t teach an old dog new tricks. Many commercial lenders still rely on traditional, paper-based processes that haven’t changed in decades. Hand-filled forms, in-person meetings, and several stages of document review are standard. While these methods offer comfort for some, they lack efficiency and scalability, especially in today’s fast-paced lending environment.


Lenders who embrace new technologies will ultimately see a competitive advantage. As technology improves, those who adapt will streamline their processes, while those who resist will be left behind.


As an Arlo advisor, how does the platform address the most pressing challenges in document collection and underwriting?

Arlo is a disruptive technology in a good way. It can eliminate human errors during loan processing by helping loan processors know exactly what documents are needed, at what stage, and whether they have received them. This helps to avoid missing items or last-minute requests, and allows loan officers to process more loans at the same time without forgetting about deals. As a result, lenders can close loans faster with less frustration.


How is Arlo’s approach different from other tools in the market?

Arlo’s advantage is that it knows what you need to do. It guides the borrower and actively monitors the document collection process. It doesn’t rely on the loan processor to give it instructions, which avoids the “garbage in, garbage out” issue we face with other loan origination software.


How can lenders position themselves to stay competitive in the coming years?

Historically, relationship-based lending—building long-term trust with borrowers—has helped lenders retain business. However, as margins tighten and loan terms become more standardized across lenders, they need to enhance their processes to differentiate their services more. Those who simplify and accelerate their document collection and underwriting processes will build trust with borrowers and attract repeat business.


Implementing efficient software solutions, like Arlo, that reduce overhead costs will enable lenders to offer more competitive loan terms by passing savings to borrowers. By embracing a borrower-centric approach, lenders can secure a competitive edge that ensures both immediate results and lasting borrower relationships.


Get efficient and accurate document collection.



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