If you’ve dipped your toe into the waters of commercial lending software (or any software, for that matter), you’ve heard the term “API.” You might not have understood exactly what it meant, but it probably seemed important. 

That’s because it is.

APIs underpin much of the magic of modern financial technology. Understanding what an API is and why APIs matter is essential for anyone who takes digital transformation seriously—at the very least to know what to look for in a SaaS lending platform.

In this article, we’ll guide you through the basics of APIs, the benefits of lending APIs, and how you can use them to your advantage. 

What’s an API, Anway?

API is the initialism for an “application programming interface,” but unless you’re a software developer, that explanation doesn’t help at all. 

In practical terms, an API is like a portal through which two pieces of software integrate and automatically exchange data. 

Imagine for a moment that your lending database is held in a virtual semi-trailer. You need to get that data into a different semi-trailer so you can provide reports to the regulators. Without an API, someone has to manually move all that data from one semi-trailer to the next. 

If only there were someone, or something, that could move the data much faster, transfer the data securely, and organize it correctly. If only those semi-trailers could “talk,” or integrate, with each other.

Enter APIs, the “faceless” applications that allow the semi-trailers (or pieces of software) to communicate automatically and transfer the data from one trailer to another without human intervention. 

In fact, by connecting multiple APIs, data can move rapidly across any number of virtual semi-trailers. Everything is secure and ready to use at a moment’s notice.

A real-world example is the applications on your smartphone that use APIs constantly to send and receive data (e.g., emails, social media feeds, weather, traffic data, etc.). APIs are everywhere, even if you can’t see them working.

Why Should APIs Matter to Commercial Lenders?

Without the help of APIs in your technology stack, you’re reduced to moving data slowly across different databases and platforms. You may need to hire software developers to help you connect archaic systems and transform data so that it can be used by newer systems. 

Commercial lending without APIs can still happen digitally, but it’s messy and takes way more work than it needs to. 

Here are some specific use cases where lending APIs can streamline your commercial operation:

1. Integration

The metric and imperial systems of measurement don’t play well together—you either use one or the other.

On its own, software can behave similarly: two systems may not share data easily or securely. Lending APIs allow business owners (would-be borrowers) and lenders to integrate and share data, and streamline the application process. Data portability opens up tremendous possibilities for agile lending. 

2. Centralization

Although they enable data portability, APIs—perhaps counterintuitively at first—allow lenders to centralize their operations.

That’s because all the data that they move around can be accessed and worked from one single SaaS lending platform. This reduces the need for applicants or lending officers to hop between platforms or software systems. Centralization is essential to building a top-notch borrower experience

3. Credit Analysis

An applicant’s credit score is just one data point. There’s so much more to creditworthiness than a single number, especially when evaluating a business.

Using APIs to collect credit data for analysis is an excellent way to build a more complete picture of the applicant—you can automatically glean data from multiple places at once. This gives your underwriters a better sense of the risk and can translate into more favorable terms for business owners.

4. Customer Experience

Business owners are consumers, too.

They can see the gap between consumer financial services and commercial financial services. Armed with API capabilities, commercial lenders can lean on third parties to offer new products, services, and a better borrower experience. 

5. Data Privacy

Moving data between systems, especially cloud-based SaaS systems, might sound vulnerable.

In reality, the sophistication of API technology offers control and security for financial institutions and their clients. While there might be risks, there are straightforward strategies to eliminate them.

APIs can also help streamline your compliance process, making everyone happy. 

Use APIs to Make Your Lending Data Fly 

Let’s look at the steps in a standard lending process, to highlight precisely where APIs can make a difference.

The best purpose-built commercial lending platforms are API-friendly and allow you to traverse each of these steps with ease. They also have built-in integrations (made possible by APIs) with third-party apps and services to create an agile, flexible, commercial lending ecosystem.

1. Onboarding

Printed paperwork and wet ink are not a delightful borrower onboarding experience. However, many lenders still rely on outdated processes to gather applicant data.

With the right APIs, you can offer applicants an sleek digital onboarding process that collects data from authorized sources and pulls it into your system for analysis. 

2. Credit Underwriting

Building the right loan package for a business owner is much easier when you have relevant and accurate data.

The quantity and quality of data you have access to will directly affect your institution’s ability to make competitive offers. Your lending platform should be able to pull together the right data points and process them automatically before guiding the lending officer to a decision.. 

3. Loan Fulfillment

Using APIs, your lending software can handle the fulfillment process as well. After facilitating the loan confirmation and signing of the agreement, the system should also disburse the funds and maintain updated information for the account. 

When all the data can live in one place, the burdens of customer-relationship management, reporting, and compliance are hugely reduced. 

4. Loan Collection

Delinquent borrowers are inevitable in the lending business.

Loan collection software simplifies debt collection agencies’ view of relevant data to track and collect on defaulted loans. APIs allow this data to move quickly, helping commercial lenders focus on delivering excellent customer service, not chasing payments. 

5. Know Your Customer (KYC) and Anti-Money Laundering (AML) Diligence

The battle against fraudsters is never-ending. It’s essential that your commercial lending platform integrates with KYC and AML verification services to catch criminals early and prevent fraud before it happens. 

The faster and simpler this process is, the less risk your organization has to deal with. 

Integration Powers Your Lending Business

Mention the phrase “integration technology” to any bank or credit union executive, and you’re likely to see them visibly shudder.

Even some technology companies that extol the virtues and ease of their products, in reality rely on a lot of human hair-pulling and sleepless nights. 

But that doesn’t have to be your experience. When looking for lending software, now you know what to look and ask for about APIs and integrations. It shouldn’t be about if they leverage APIs, but which.

The SPARK SaaS lending platform is designed to fit into your commercial lending workflow, not the other way around. We’ve created seamless integrations with critical tools and services, to take the sprawling complexity of commercial lending and make it manageable—or dare we say it? Simple. 

If you’d like to see how a modern, API-powered SaaS lending platform can change your operation for the better, request a demo. The future is bright with SPARK. 


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