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Increased Credit Approval Rate:
Small Business Bank
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| SITUATION:
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President, small business lending division of a major financial institution
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| CRITICAL ISSUES:
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- The credit approval rate on new small business loans is 46 percent.
- The booking rate on approvals is 53 percent.
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| REASONS:
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- President thinks the current process is not performing at the required level.
- More efficient small business lenders are taking market share.
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| PAYNET:
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- We conducted retro and swap set analyses on the lender’s portfolio and recent applicants using credit scores.
- The approval rate was demonstrated by score quality, and approving all highest-scoring applicants was recommended.
- Further review of the lowest-scoring applicants was recommended.
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| RESULT:
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- Immediate benefit: increasing the approval rate by 1 percent provided $5.1 million more earning assets per year.
- Long-term strategy: approving all high- and mid-scoring applicants will increase the approval rate by 6 percent and add $30 million per year in earning assets.
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