Tag: Cashflow

Back in the analog days of loan underwriting, credit scores were the most significant borrower metric for lending decisions. While a borrower’s credit rating is still relevant, lenders are increasingly giving more weight to cash flow, which is often a better indicator of repayment risk. Traditional credit scoring models often fail to include alternative data, such as cash flow, in providing an accurate picture of a borrower’s risk profile. Lenders have historically leaned heavily on credit scores because they expedited the due diligence process, but alternative data is becoming increasingly important. This is helping to level a playing field in…

Highlights Overall Small Business Health Trends While the pandemic resulted in shuttered businesses and ruined personal finances, for many, the opposite happened. Shutdowns and unemployment reaching levels not seen since the Great Depression were met with trillions of dollars in government stimulus and the economy’s swift recovery. According to the Census Bureau, the first two rounds of stimulus payments lifted 11.7 million people out of poverty, leaving Americans with $2.7 trillion in extra savings built up. The personal savings rate hit a record high of 33.8% in April 2020, according to the Bureau of Economic Analysis, up from an average…

As we wait for life to get back to normal once the pandemic ends, navigating continued uncertainty in the meantime, one thing is clear: there will be a “new normal” shaped by the global health crisis. According to BDO’s 2021 Financial Services Digital Transformation Survey, the impacts of COVID-19 are changing customer behavior and redefining business for the long term. Small and medium businesses (SMBs) are actively looking for access to capital and discovering that they have more options than ever. SMB lending will revolve around three critical capabilities — efficiency, flexibility, and responsiveness — as this landscape quickly evolves….

One of the primary uses of alternative data is the review of bank statements to determine a company or individual’s assets and cash management over an extended period of time. You might remember when a relatively quiet yet significant announcement was made a few years ago by regulators in Washington regarding the use of alternative data in underwriting consumer loans.  Almost 60 million people in the U.S. have found it challenging to obtain financing for automobiles, furniture and other consumer purchases because historic credit scoring models do not adequately represent their ability to repay. Issues that Successful Fintech Lenders Have…