• SVP, Strategy and Chief Risk Officer of a small fleet business lender unable to accomplish profit objectives with current approval rate of 84%.

• Aged internal model and review rules without delination by type/class of trucks.
• Lack of historical borrower performance data limited ability to model risk.
• Subjective, manual decisioning produced inconsistent application of credit policy.
• $158.6 million annual originations volume.
• Credit losses totaled $1.3 million annually.

• Provided internal performance archive data to build semi-custom business segment scorecards. Data included Transportation Score and industry-specific variables.
• Retro tested Transportation Score on lender's booked deals through different economic cycles in comparison to existing internal model.
• Analyzed decisioning practice and demonstrated ability to identify high quality applicants that were being declined as well as high risk borrowers that were being approved.

• Raised credit approval rates to 95%.
• Increased originations bookings by $20.6 million.
• Maintained same credit loss amount at $1.3 million annually.

• Lender desired improved efficiencies and a more predictive decisioning process through auto pulls and a more touchless environment.

• Used 15 year old scoring model that no longer performed well. Decisioning output led to reduced sales and unnecessary losses, so credit staff ignored the model.
• High cost structure: spent nearly $5 million in the credit process alone. Cost per application was $250 which they wanted to reduce by 60%.
• $2 billion portfolio.

• Developed suite of 6 custom scorecards utilizing lender's application data, multiple commercial and consumer credit bureaus' data, and addressing unique borrower segments.
• Implemented scorecards as primary decisioning tool.

• Realized annual reduction in processing costs of $9 million.

• Highly manual originations process was costly and inconsistent.
• Approval rate far below company goal; some "good" applicants were declined.

• Retro-tested to find the transportation score for the lender's booked deals.
• Analyzed decision-making practices to demonstrate the ability to approve high-quality applicants that were being declined.
• Recommended a swap set to reject low-quality deals and approve high scores.

• Credit losses reduced by 16 percent.
• Originations increased by 5 percent.
• Overall value of this improvement was $2.7 million per year.

• More efficient small business lenders were taking market share.
• 46 percent credit approval rate on new small business loans.
• 53 percent booking rate on approvals.

• Conducted retro and swap set analyses on the lender's portfolio and recent applicants using credit scores.
• Illustrated approval rate by score quality, and recommended approving all highest-scoring applicants.
• Recommended further review of the lowest-scoring applicants.

• 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 would increase the approval rate by 6 percent and add $30 million per year in earning assets.

• Office-equipment-specific lender needed tools tailored to its type of lending to provide process improvement.

• Conducted retro and swap set analyses on the lender's portfolio and applicant population using the office score.
• Validated that the office score identified risk for the client's portfolio through the retro analysis which showed the historical "bad" rates by score on booked deals.
• Analyzed the number of approvals and declines by score to determine opportunities to reject the really bad deals and to offset those by increased approvals on the really good deals.

• Credit losses reduced by $10.2 million per year.
• Originations increased by $5.1 million per year.

• Lender checked credit references via phone calls and fax requests.
• Lender needed to respond quickly to dealers to maintain satisfaction and high service level.

• Provided access to credit history reports via the Internet to eliminate the faxes and phone calls for credit references.
• Provided training to the credit staff on use of the credit history reports.

• Lender realized a 40 percent decrease in turnaround time to dealer.
• Faster response enabled the lender to capture more dealer originations, which resulted in $50 million additional loan volume.
• Saved $260,000 per year by reducing credit application processing time.

• Lender needed to reduce high operating costs of rating small-ticket loans.
• Lender was the finance division of a major commercial bank.
• Lender needed to proactively improve the risk-rating system in reaction to parent and regulatory demands.

• Developed a default forecast report.
• Segmented the risk-rating system by obligor and facility types.
• Compared the lender's current risk-rating system with the new system.

• Lowered the division's cost of capital allocated by parent.
• Improved productivity of the risk-rating function by 75 percent per year.
• Structured statistical process yielded better results. See chart below.

Default Forecast Report  Bank Finance Subsidiary

Sample Bank SBU - Exposure by Bank's Risk Grade vs. PayNet Risk Grade

• Lender operated vendor financing programs with a goal to be first-choice financing source among vendors.

• Developed a custom portfolio benchmark report showing marketing, credit, and collections performance versus that of comparable peers.
• Demonstrated a flat market share within equipment segments over a three-year period.
• Demonstrated that long-term delinquency trends were the lowest 10 percent among their peers.

• Approval rate was increased by 1 percent.
• Origination volume was increased by $50 million.
• No material change in credit quality.

• Needed to explain portfolio performance to parent.
• Needed to identify source of problems in order to make organizational changes.

• Developed a custom portfolio benchmark report showing operational performance versus that of comparable peers.
• Proved the source of delinquency to be misapplication of payments by identifying multiple contracts for same borrower and then reviewing delinquency occurrence for each contract.

• Reduced operating costs through improved payment-processing function.
• Increased cash flow by collecting past dues.

• Foreign parent unfamiliar with the U.S. finance market.
• Continued parent funding dependent on demonstrating lender's risk level reasonable versus that of U.S. peers.

• Developed a custom portfolio benchmark report.
• Illustrated the lender's credit delinquency versus that of anonymous peer group of comparable construction lenders.
• Compared the lender's market share and portfolio growth to those of peers.

• Defined more stringent credit policy rules for high-risk borrower types.
• Validated a business model for a foreign funding source.