Loan Origination and Activation
Overview
Canopy's flexible policy engine empowers you to create and deploy an endless variety of credit products tailored to your business needs. Whether you're launching a new lending program or expanding your existing offerings, our platform provides both ready-to-use templates for common credit products and the flexibility to design completely custom solutions
The policy engine operates as the foundational framework that governs how your credit products behave throughout their entire lifecycle. Think of policies as the rulebook that defines everything from how interest accrues and fees are applied to how payments are allocated and operational procedures are handled. This comprehensive approach ensures consistency, compliance, and predictable behavior across all your lending operations.
Our two-step process streamlines product creation and borrower onboarding, allowing you to move from concept to active lending program efficiently while maintaining full control over your credit product's characteristics and behavior.
Implementation Steps
Step 1: Select or Design Your Credit Product
The foundation of any successful lending program begins with choosing the right product structure. Canopy offers two pathways to meet your specific requirements and timeline.
Option A: Leverage Pre-Built Templates
Our library of battle-tested templates covers the most common credit products in the market. Each template represents years of industry best practices and regulatory compliance considerations built into a ready-to-deploy solution. Available templates include charge cards for corporate expense management, credit cards for consumer and commercial lending, working capital lines of credit for business cash flow needs, term loans for structured financing, and merchant cash advances for revenue-based lending.
The beauty of these templates lies in their immediate usability combined with customization options. Any template can be enhanced with secured policies to create collateral-backed versions, expanding your risk management capabilities and potentially improving your loan economics.
Option B: Create Custom Products with Canopy
When your lending strategy requires unique product characteristics that don't fit standard templates, Canopy's team collaborates with you to design custom solutions. This process involves understanding your target market, risk parameters, operational requirements, and competitive positioning to create a tailored policy framework.
The custom design process encompasses five critical policy areas that work together to define your product's behavior.
| Policy grouping | Explanation |
|---|---|
| Lifecycle policies | Establish the fundamental rules governing how credit obligations are created, modified, and fulfilled throughout the account's existence. |
| Interest policies | Determine the mechanics of how interest accrues, including calculation methods, compounding frequencies, and rate adjustment triggers. |
| Fee policies | Define when and how various fees are applied, from late fees to origination fees, ensuring transparent and consistent fee structures. |
| Payment policies | Control the allocation hierarchy for incoming payments across principal, interest, and fee balances, directly impacting cash flow and accounting treatment. More information on payment allocation can be found in the payment pouring workflow guide |
| Operational policies | Address procedural aspects like dispute resolution, provisional credit decisions, and other customer service scenarios that require systematic handling. |
| Secured policies | Define loan-to-value ratios, acceptable collateral types, valuation methodologies, monitoring requirements, and automated responses to collateral value changes. These policies provide the framework for managing collateral-backed lending risk systematically. |
Step 2: Complete Borrower Onboarding
Once your product template is configured, the onboarding process follows a structured three-step API sequence that establishes the complete lending relationship. This standardized approach ensures data consistency and proper account setup regardless of your chosen product type.
i. Creating the Borrower Profile
The first API call establishes the borrower entity within Canopy's system. This step captures essential identity information, contact details, and any relevant demographic or business classification data that will be used throughout the account lifecycle. The borrower profile serves as the foundation for all subsequent account activities and reporting.
ii. Establishing the Account Structure
The second API call creates the account container that will house the credit relationship. This step links the borrower to their specific account and establishes the organizational structure for tracking balances, transactions, and account status. The account serves as the primary identifier for all ongoing lending operations.
iii. Configuring the Line of Credit
The final API call brings together your selected template with specific account parameters to create a fully functional credit facility. This step deserves particular attention because it transforms your template into a live, operational credit product.
Canopy's architecture uses a revolving line of credit as the foundational structure for all credit products, whether they operate as traditional revolving facilities or term-based lending products. This unified approach provides tremendous flexibility while maintaining consistent behavior patterns across different product types.
The line of credit configuration requires several key parameters that work alongside your template policies to define exact product behavior.
| Parameter | Description |
|---|---|
effective_at | Establishes when the credit facility becomes active and serves as the baseline for all subsequent calculations and scheduling. |
credit_limit_cents | Defines the maximum exposure you're willing to extend to the borrower and directly impacts their available credit and your risk exposure. |
interest_rate_percent | Enables personalized pricing strategies. |
billing_cycle_interval | Establishes the rhythm of your lending operations, determining how frequently statements are generated and payments are due. Monthly cycles are most common, but weekly or other intervals can accommodate specialized business models. |
payment_due_offset | Defines the grace period between statement generation and payment due dates, balancing borrower convenience with cash flow management needs. This parameter directly affects your collection timeline and should align with your operational capabilities and customer expectations. |
first_billing_cycle_interval | Provides operational flexibility for managing payment due date alignment across your portfolio. This optional parameter allows you to adjust the initial cycle length so that all subsequent due dates fall on the same day of the month, simplifying operations and improving collection efficiency. |
grace_offset | Determine when late fees are applied relative to missed payment deadlines. This parameter works in conjunction with your fee policies to establish clear expectations and consequences for payment delays. |
term_length | For closed-end revolving credit products like operational lines of credit, the term length parameter establishes the maturity date. For which a balloon payment would be expected. |
Frequently Asked Questions
Q: How long does it typically take to launch a new credit product using Canopy's platform?
A: Implementation timelines vary significantly based on your chosen approach and requirements. Off-the-shelf templates can be deployed within days once your integration is established, as they require minimal configuration beyond basic account parameters. Custom product development typically takes 2-4 weeks depending on complexity, regulatory requirements, and the extent of customization needed. The bulk of implementation time usually involves integration testing and compliance validation rather than product configuration itself.
Q: Can I modify templates after my credit program is already operational?
A: Yes, Canopy's policy engine supports ongoing modifications to accommodate evolving business needs and market conditions. However, changes require careful consideration on the timing of the change along with their impact on existing accounts and regulatory compliance. We recommend working with our implementation team to assess proposed changes and develop appropriate migration strategies for existing borrowers when necessary.
Executing policy updates
More information on executing policy updates can be found in our policy flexibility workflow guide
Updated 1 day ago