Centralized vs. Decentralized Loan Administration: Which Model Maximizes Benefits?

Securing the riskiest part of your portfolio is crucial, especially when economic conditions are uncertain. Choosing between centralized and decentralized loan management is something that each lending institution will need to do as they grow and scale. When evaluating lending practices, lending institutions may consider a centralized model for loan administration as this can lead to greater efficiency, more bank-level controls, better risk management, and, ultimately, a better customer experience.

When shifting to a centralized loan administration, the burden of responsibility for tedious and timeconsuming administrative duties can be lifted off of Relationship Managers (RMs) and Branch
Administrators, allowing them to focus on building existing customer relationships and forming new ones. Some of the benefits of centralizing loan administration include:

• Improving Customer Relationships - RMs can spend less time on administrative work and more time developing new business, as well as strengthening existing relationships.
• Streamlining Communication - Clients have a central point of contact for all communication regarding their loan. As it is the Administrator’s sole responsibility, they will have more bandwidth to communicate with clients about their loans compared to RM who may be originating new deals. 
• Maximizing Core Skills & Competencies - By designating a central administrator for all loan management and administration, the administrator will garner expertise in those duties in a shorter amount of time. That way, they can focus all of their efforts on those duties compared to an RM. This will decrease employee errors and oversights during the draw process.
• Reducing Risk - Separation of duties creates room for unbiased risk management. The RM’s main priority is the customer—while this is a good thing generally, the customer relationship could cloud the RM judgment when it comes to gathering the appropriate documentation, inspecting the property, or statements from the borrower at their “word” and can result in more room for risk.
• Increasing Efficiency - Clients send draw request packages to the draw reviewer directly which can limit the amount of handoffs required in the draw process while increasing flexibility. 
• Simplifying the Approval Process - Approval processes can also be streamlined as the draw reviewer can be in the same office as the executive approver as opposed to approval via email or phone call.
• Improving Technology Adoption - With a central administrative team, new processes and technology training is simplified. A single Senior Administrator can relay process changes to the team and help train team members on new technologies in one location.

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