Loan Participation Technology

By March 29, 2022Blog

How do Loan Participations Work?

In today’s financial climate, banks are looking for ways to reduce risk, diversify their portfolio, increase liquidity, and remain flexible and nimble. One of the growing ways to accomplish all of these advantages is to originate and participate in loans with other institutions. There are several reasons that banks buy and sell loans, and the process benefits both parties. 

Benefits of Loan Participations

A lender can benefit from loan participations in many ways. First, they can reduce and manage risk by working with other financial institutions to fund a loan. Second, they can diversify their portfolio by investing in different types of loans. Each bank must manage their balance sheet appropriately and most even have guidelines and limits they must abide by. 

Loan Participations are beneficial for both the originator and the participants in many of the same ways:

Benefits of Loan Participations for the Originators

Originators are often looking to retain key clients. By originating a loan and seeking participants, banks can retain those key clients by being able to take on a loan above their limit. This way your best customers do not turn to a competitor to fulfill their larger loans. Other benefits include:

  • Reducing concentration risk
  • Diversifying your portfolio
  • Making more loans
  • Increasing fee income

Benefits of Loan Participations for the Participants

Oftentimes, banks are looking for ways to manage their balance sheet, by putting access funds to work. We all know that investing funds results in more return than when funds are stagnant. Other benefits include:

  • Diversifying your portfolio
  • Increase interest income
  • CRA credits

How to Get Started with Loan Participations?

Many banks start small, with lenders they’re familiar with. Some financial institutions don’t know where to begin, and do not have established trading partners. Maybe their known partners aren’t able to contribute at this time.

 That is where an online marketplace like Participate can come in handy. Not only will you be able to connect with other banks looking for trading partners, you will be able to maintain and keep track of all your documents and shares in one place. Making participations faster and easier to do.

What is Loan Participation Technology?

Loan participation technology has been around for a few years but it has become more popular in recent years as lenders have begun using it more often with the rise of online lending platforms. The old manual process of mailing documents back and forth had formerly driven many banks to avoid the process entirely.

Loan participation technology has had a huge surge recently, with more banks looking for new trading partners than ever before. 

Loan participation software assists in all aspects of the loan process, from origination to servicing. It provides a centralized system to manage loan applications and approvals, while it also manages risk and compliance. 

What to look for in a Loan Participation Technology Tool

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The right loan participation technology connects banks with new trading partners and provides e-signature capabilities and other efficiency tools.

Users are able to choose the terms and conditions of their loans, the amount they want to invest, and other factors. Look for a tool that takes care of your NDA’s and non-compete agreements. As this will save you weeks of back and forth emails and phone calls.

The right tool will increase bank efficiency, cutting weeks off of the traditional slow participation process, giving your bank the additional liquidity and flexibility needed to maximize profits.

BankLabs has created a new way to revolutionize the traditionally slow participation process with Participate, a simple project management system that empowers users to self-serve and submit, track, and follow up on their data requests.

How You Can Start Using Participate: Loan Participation Technology

Participate is a revolutionary new platform that allows lenders to participate in peer-to-peer loans. With Participate, banks  with loans to sell can connect banks that are looking for loans to buy, and our automated platform makes participations faster and easier to do. 

Best of all, Participate is free for downstream buyers.

Participate is the best way to manage all of your participations. Whether you’re looking to buy or sell a participation, you’ll be able to manage it on Participate. With over 250 banks on the platform today, our customer base is growing weekly, and we’re always adding new features to make it easier for you to manage your participations.

Participate is a secure and efficient way to digitize and share loan info, documents, and automate workflow for originators, participants and lenders.