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Also known as an LPO, a loan production office is an office or department within a bank that is responsible for accepting loan applications and managing the process of financing the loans that are approved. The purpose of the office is to make sure that all the documentation required to process the loan is properly prepared, including any documentation that is necessary to justify the extension of the loan. In many situations, the loan production office is proactively involved in promoting the loan packages offered by the financial institution.
The exact structure of a loan production office will vary, based on governmental regulations regarding banking, as well as the size and structure of the banking institution itself. In a smaller bank, the office may be composed of one or two people, and may actually function as part of the larger underwriting team. With larger banks, the office may contain a larger staff that makes it possible to efficiently meet the needs of a larger clientele.
A loan production office often focuses on what is known as peer-to-peer lending. This means that the LPO takes steps to market the bank’s loan services to other banks. Within the office, the structure may allow the members of the loan production team to approach any size business. In larger banks, specific members of the team may focus on smaller businesses while other members are responsibly for actively soliciting business from larger companies.
A loan production office normally has the ability to discuss any aspects of the loan packages offered by the bank with anyone who is interested. This includes discussing the rates of interest that apply to different types of business loans, as well as the specific terms and conditions that apply. Once a loan officer or the bank’s underwriting department has accepted an application and it has been approved, the office moves to prepare the documents that both a bank officer and the borrower must sign. The prepared documents usually include supporting documentation as well as the loan contract.
While a loan production office is free to promote loan packages and to answer questions by prospects, the office is not usually empowered to accept customer deposits or payments of any kind. In the event that a borrower wishes to submit a payment, a member of the production office team will direct the customer to a teller or other bank official who does have the authority to accept payments. This helps to ensure that the payment is credited to the customer’s account in a timely manner, and that the balance is adjusted accordingly.