Using Automation to Increase Loan Participation


Loan participation is not a new concept, but the way credit unions approach it is in need of an update. Currently loan participation is a slow process, rife with long and tedious loan documents that take time to compile and review. With automation touching nearly every aspect of financial services – and life in general – it’s time that loan participation gets a digital update, as well.

Loan participation is important for credit unions, it helps them split up a loan that might be too large for one institution or spread out a loan that might be too risky to take on alone. Regardless of the underlying reason, loan participation exists to help credit unions free up liquidity on their balance sheets so that they can take on more loans.

Currently, participation loans are hard work, they involve lots of loan documents that are keeping credit unions out of the participation game. First, the credit union seeking participants on a loan must generate these documents, which takes up a good deal of time for something that ultimately might be too much work for any institutions interested in participating to even review. This time-consuming and manual process is making loan participation less than popular for all parties.

In an era where any manual process is considered a thing of the past, credit unions have the opportunity to leverage technology to help automate processes, saving them time and helping them to better connect with the world around them.

For loan participation, technology first and foremost would help CUs save time. When all of the loan data is digitized, it becomes much easier to produce loan documents, wherever and whenever they are needed. With a digital process, credit unions can access loan information anywhere and can more easily share it with anyone interested in participating.

With a digital process also comes more secure and accurate data. Without the need for manual input of information, there is less risk of human error when compiling loan data. Also, when credit unions choose a digital process over a manual one, data can be encrypted, keeping sensitive information much more secure than keeping it on a sheet of paper. Keeping the information digitally also gives the credit union greater control over who can see and share important data.

To take it a step beyond just automation, having a digital platform created specifically for participation loans would help credit unions connect with each other, making it easier to share loans that need participation or find loans to participate in. This creates more transparency in participation lending.

This transparency also opens up new opportunities for CUs to participate in smaller deals they might have originally passed up. With a more efficient and streamlined participation process and easier access to data, CUs can take on smaller deals in a much more cost-effective way.

The efficiency created through the use of technology in loan participation ultimately speeds up the way credit unions are able to free up space on their balance sheets. This means their lending business as a whole is affected by this one specific area, because with more liquidity on their balance sheets, they are ultimately able to serve more borrowers of all types, be it C&I, construction, student, mortgage, auto, equipment or logistics loans.

Where loan participation has traditionally been a hassle, it does not have to be. It’s time for credit unions to leverage technology to create a more efficient, cost-effective and transparent process that promotes more participations and ultimately equips lenders to better serve their borrowers.

Matt Johnner is president and co-founder of BankLabs. The mission of BankLabs is to reimagine banking products for the future through community-oriented technologies that create new fee income, attract deposits, expand loan opportunities and differentiate the financial institution from competitors. BankLabs believes that community banking is a way of doing business, not a size, location or traditional definition. For more information, visit

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