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In the ever-evolving landscape of borrowing, direct lending has emerged as a compelling option for individuals and businesses alike. With its streamlined processes, personalized approach, and innovative solutions, direct lending is gaining popularity among borrowers seeking efficient and flexible financing options. In this blog post, we explore the top five reasons why direct lending has captured the hearts of borrowers worldwide. Plus, we examine some crucial ways that AXIS by AIO Logic helps lenders optimize those aspects that borrowers love about direct lending.

1. Streamlined Application Process

One of the most significant advantages of direct lending is the simplicity and speed of the application process. Unlike traditional banks, which often require extensive paperwork and lengthy approval procedures, direct lenders leverage technology to offer a hassle-free experience. Borrowers can apply for loans online, without the need for in-person meetings. Furthermore, direct lenders employ advanced algorithms and data analytics to assess creditworthiness quickly and make lending decisions in a matter of hours or days, rather than weeks. This efficiency is particularly appealing to borrowers who require fast access to funds for urgent expenses or time-sensitive investments.

The speed and power of credit assessments is enhanced even further for direct lenders using AXIS by AIO Logic to underwrite their loans. AXIS provides sophisticated financial spreading and analytics functionality for both underwriting and ongoing financial monitoring. Submitted financials are initially mapped to AXIS common sized accounts and then all subsequent financial data follows this mapping such that no financial data entry is required by the user. Once financials are spread into AXIS, the platform automatically performs vertical, horizontal, and trend analysis in order to calculate 42 financial ratios and score borrower financial health.

2. Flexible Terms and Customized Solutions

Direct lenders understand that one size does not fit all when it comes to borrowing needs. That’s why they offer flexible terms and customized solutions tailored to the unique circumstances of each borrower. Whether it’s a short-term loan to cover unexpected expenses, a long-term financing solution for business expansion, or a specialized product for borrowers with less-than-perfect credit histories, direct lenders have the flexibility to design loans that meet the specific needs and preferences of their clients. This personalized approach sets them apart from traditional banks, which often adhere to rigid lending criteria and may be less willing to accommodate individual circumstances.

Offering borrowers flexible terms and customized solutions is made easy when using AXIS by AIO Logic, thanks to the robust functionality of the platform. As the only end-to-end solution designed specifically for the complex requirements of commercial lending, AXIS has native handling for every commercial loan structure. For lenders using AXIS, this means that they can offer borrowers any loan structure to suit their needs, whether that is amortizing, revolving, ABL, delayed draw, interest only, or several others. Plus, based on the loan type selected, AXIS will adjust the fields required to set up the loan terms for that type of loan.

3. Competitive Interest Rates and Fees

In the past, borrowers may have associated direct lending with higher interest rates and fees compared to traditional bank loans. However, the landscape has changed significantly in recent years, with many direct lenders offering competitive rates and transparent fee structures that rival those of banks. By operating with lower overhead costs and leveraging technology to streamline processes, direct lenders can pass on cost savings to borrowers in the form of lower interest rates and fees. Additionally, some direct lenders offer incentives such as discounts for autopay or loyalty programs, further enhancing the value proposition for borrowers.

When it comes to structuring interest rates and fees, AXIS provides lenders with unmatched levels of functionality and ease. Relating to interest rates, AXIS has full functionality for fixed and variable rate loans with automated application of interest rate indexes including Prime, 1M Libor, 3M Libor, 3M Term SOFR, and SOFR. AXIS also provides independent functionality for Current and PIK interest, and for simple and compounding interest. Additionally, AXIS allows lenders to structure fees however they need, including functionality for a wide range of fee types and the ability to create custom fees as needed.

4. Accessibility and Inclusivity

Direct lending has democratized access to financing, making it more accessible and inclusive for a broader range of borrowers. Unlike traditional banks, which may have stringent credit requirements and may be reluctant to lend to individuals or businesses with less-than-perfect credit histories, direct lenders take a more holistic approach to credit assessment. They consider factors beyond just credit scores, such as income stability, cash flow projections, and business potential, to evaluate the creditworthiness of borrowers.

In cases where firms are lending to borrowers that may have less-than-perfect credit histories, the ability to comprehensively analyze their financial situation prior to the loan being issued and analyze the performance of the loan during its lifecycle are both of crucial importance. As we discussed earlier in this blog, the financial spreading and analytics features of AXIS are extremely powerful in conducting credit assessments. However, AXIS also offers a robust suite of automated portfolio reporting and analytics that allow lenders to view reporting by vintage, loan, or account. This reporting is real-time and dynamic, allowing users to obtain powerful insight relating to the performance of any given loan.

5. Transparency and Accountability

Transparency is paramount in the world of direct lending, with reputable lenders prioritizing clear and concise communication throughout the borrowing process. From the initial loan application to the final repayment, borrowers can expect transparency regarding interest rates, fees, terms, and conditions, enabling them to make informed decisions about their financial commitments. By fostering trust and transparency, direct lenders build long-term relationships with borrowers, laying the foundation for mutual success and financial empowerment.

The end-to-end scope of AXIS by AIO Logic is important to the level of transparency and accountability that lenders can provide borrowers. Thanks to AXIS’s native handling of every phase of the loan lifecycle, seamless processes and data flows are created. For borrowers, this means they can find all account and loan information (e.g. balances, documents, etc.) in one centralized location. Additionally, borrowers can collaborate with lenders using the discussions, notes, and tasks features in AXIS, allowing stronger relationships to be built.

Conclusion

In conclusion, the popularity of direct lending among borrowers can be attributed to its streamlined processes, flexible terms, competitive rates, accessibility, and transparency. As borrowers continue to seek efficient and personalized financing solutions, direct lenders are poised to play an increasingly prominent role in the financial landscape, empowering businesses to achieve their goals and aspirations. If your firm is interested in automating and optimizing your direct lending processes, please feel free to contact us today to schedule an intro call or demo and learn more about everything that AXIS by AIO Logic has to offer!