Faster, More Automated Loan Origination With ACH & LoanWell

Adapt or become obsolete.

This has always been true (just ask any pager salesperson) but it’s certainly the case today for community lenders as small businesses continue to be responsible for providing a majority of the jobs in the United States. As more professionals look to become their own bosses, consumers looking for small business loans are faced with limited options and outdated processes.

When it comes to small business loans, the lack of adaptation is threatening some local banks and credit unions that have stuck with inefficient, manual processes—while other large retail banks have gone digital and automated. It was this problem that caused LoanWell to develop a solution. LoanWell offers community banks and credit unions with a platform for providing better access to capital—at affordable rates—for small businesses and consumers. By merging new technology into a traditionally manual industry, LoanWell can offer a customizable loan origination system to automate the processes of loan application intake, closing, signing, disbursement and repayment.

In many cases, community lenders need up to 90 days for a loan closing. Some retail banks can offer to underwrite a similar loan in less than 10 minutes. So what do you do when your competitor offers a service that is nearly 13,000 times faster? You add tools that help you close the gap.

Without a loss in accuracy, that’s what LoanWell does for community lenders.

LoanWell is a tool for lenders to stay competitive in offering loans to small businesses. After migrating any existing data, each lender customizes the LoanWell platform to match their branding and allow for a borrower to apply online. Each individual lending team has access to a set of tools that allows them to assign tasks or send out automated email notifications with loan status updates to borrowers, saving all kinds of time and inefficient communication.

“As we make more capital affordable there become wealth generation opportunities,” says Bernard Worthy, CEO & Co-Founder of LoanWell. “Specifically with small businesses, because two of every three jobs are created by a small business. We felt that technology could enable the lending and enable community development.”

Through LoanWell, lenders can facilitate the disbursement and repayment of each loan through the platform—without coming into possession of the transaction. Each transaction through LoanWell goes through the ACH Network, the standard for payments within the lending industry.

“For ACH, Dwolla is the industry leader,” Worthy says. “With Dwolla, we’re able to transfer money really smoothly, easily and quickly in a way that typical lenders aren’t familiar with. We have lenders asking, ‘A borrower can submit a payment whenever they want?’”

Worthy says he smiles and simply responds:

“Yes.”

Lending a Hand

Worthy, with a software development background and co-founder and COO Justin Straight, whose experience is in micro-finance, met in Durham, N.C. in 2013. As they saw the inefficiencies that existed within community lending, the duo believed that technology could speed up the document collection and communication aspect of obtaining a loan.

In 2017, they launched LoanWell.

“Some of the customers have really had their eyes opened,” Worthy says. “They’ve been on this cadence of sending payments on the 1st and 15th of the month. We’re able to offer a flexible solution that credit unions and smaller banks haven’t really seen before.”

To enable the movement of money, Worthy says they “went down the rabbit hole” of considering building their own payment integration directly with a bank. The idea was intriguing, Worthy says, “until we realized the compliance around that.”

The complications and red tape of a bank integration led LoanWell to look for third-party payment vendors, which had to meet Worthy’s three standards:

1. The ability to facilitate a transaction between two different parties and not be in the flow of funds.
2. Clean documentation to configure the API in any particular way.
3. The ability to onboard new users in a way that complies with KYC (Know Your Customer) requirements.

After considering a few other payment providers, Worthy says they ultimately went with Dwolla because of the API and the ease of onboarding users.

“We did our research. As an engineer you just become good at searching the internet,” Worthy says laughing. “A lot of payment systems can move money but the onboarding can be a real pain. If I’m a borrower, I don’t want to wait 10 minutes to know if my account was validated.

“Dwolla checked off all those boxes and continues to do so.”

Loan Closing

Prior to going live with Dwolla, Worthy says he used the Dwolla Sandbox, a testing environment, to effectively build the entire LoanWell application and replicate nearly every piece of functionality. Having that testing environment—paired with detailed API documentation—allowed LoanWell to integrate Dwolla’s ACH payment API in less than a month.

“We were able to have our internal users test that out before going live to avoid surprises,” Worthy says. “Dwolla definitely has one of the nicest sandboxes I’ve worked in, especially with the dashboard for the sandbox. I can’t speak highly enough of how helpful the sandbox was. The sandbox validated Dwolla as a fit.”

Since going live, Worthy says Dwolla’s customer success team has “really stepped up” and is working with them on custom features to improve their workflow. Worthy and his team are able to reach out directly to their Dwolla account manager and get an answer in real time.

“Being able to have that conversation and just go down that road, regardless of what happens, is great,” Worthy says. “Dwolla feels more like a partnership than just another vendor.”

Building Equity

As 2019 progresses into 2020, Worthy says their team is going to continue “swimming upstream,” looking for credit unions and community banks to bring into the system. Their focus remains on community lending for small businesses and consumers, automating more pieces of the loan origination process.

“Underwriters and community lenders can have more information to make their credit decision,” Worthy says. “These institutions can customize their needs on the origination side.”

As they work with bigger institutions, Worthy says they wanted to move money quicker than the standard ACH transfer times. With Dwolla, LoanWell can offer Same Day and Next Day ACH transfers to increase the speed of a bank transfer.

“We can effectively and efficiently disburse the loan, not just the repayment,” Worthy says. “So we become more important to these institutions and can replace cutting a check or completing a wire transfer. Now the borrower can get started on their business faster.”

Worthy is proud of the work his team is doing to provide affordable capital and increase wealth generation opportunities. It’s something they think about every day.

“Most vendors offer software for a process,” Worthy says. “We are not that, we hope our customers know that from working with us. We care about your end customers like you do. Your mission is not lost by working with a vendor like us.

“And our mission isn’t lost by working with Dwolla.”