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Credit Scoring
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PayNet has done extensive work to understand the current state of credit granting to small businesses. Our research shows a large disparity in the performance of consumer credit granting versus commercial credit granting and even among individual lenders. For example, a large, sophisticated small business lender guarantees a loan decision on a $50,000 commitment within two days. In the consumer lending world, that same loan can be decisioned and risk-rated immediately. PayNet believes the same capability will be available in small business lending over the next few years. The combination of new data sources, scoring know-how, and automated application-processing systems is causing a sea change in small business lending.
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A large divide also exists among individual lenders. Some lenders have increased their approval rates to 85 percent of all applicants within acceptable risk parameters. On the flip side, other lenders seem satisfied with a 50 percent approval rate. PayNet research shows that even the best lenders are rejecting some of the highest-quality small business borrowers—resulting in lost approvals and lost opportunities to increase creditworthy earning assets. PayNet’s analytics provide lenders the capability to increase approval rates within acceptable risk-tolerance levels. Such improvements make lenders much more proficient than they would otherwise be at increasing originations
and controlling credit risk. Our philosophy on the role of credit scoring in approving lenders’ capabilities can be found
in Articles.
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