Origination: Overview, definition, and example
What is origination?
Origination refers to the process of creating, initiating, or starting something, often related to financial transactions, business processes, or services. In a business context, origination is commonly used to describe the beginning of a financial deal or loan, such as when a bank or financial institution originates a loan. It can also refer to the creation or initiation of contracts, agreements, or even products.
For example, in lending, loan origination involves the steps taken to process a new loan application, evaluate the borrower's eligibility, and ultimately issue the loan.
Why is origination important?
Origination is important because it is the first step in the creation of valuable business processes, products, or financial transactions. In finance, the origination process sets the foundation for loan agreements and ensures that everything is in place before the deal moves forward. For businesses, understanding origination helps in managing the early stages of various transactions or projects and ensures that all required steps are properly completed from the start.
For SMBs, effective origination practices ensure smooth operations and the ability to take advantage of business opportunities—whether it’s securing funding, launching a new product, or forming a new partnership.
Understanding origination through an example
Imagine your small business needs funding to expand. You apply for a loan at a bank, and the bank begins the loan origination process. This process includes gathering your financial information, evaluating your creditworthiness, and deciding on the loan terms. Once this is complete and the loan is approved, the loan is officially "originated" and the funds can be disbursed for your business use.
In another example, if your business is introducing a new product, the origination process would involve the initial planning, design, and market research phases to bring the product from concept to launch.
An example of origination in action
Here’s how origination might be referenced in a business agreement or financial process:
“The loan origination process includes the submission of required documents, assessment of financial standing, and final approval before the loan agreement is signed and funds are disbursed.”
Conclusion
Origination refers to the creation or initiation of something, whether it's a financial transaction, a product, or a service. For SMBs, understanding origination is essential for managing the beginning phases of important processes, like securing funding, launching new products, or entering agreements. A smooth and effective origination process can help ensure that business goals are met and that transactions proceed without unnecessary delays.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.