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home / Loans and Lending

Why up-to-the-minute data is crucial for cash flow analysis

18 Jan 2024
featured why up to the minute data is crucial for cash flow analysis

Cash flow analysis examines a borrower’s various cash inflows and outflows, which helps lenders get a detailed picture of their financial health. It provides valuable insights into income, expenses and trends to help financial institutions manage risk and make informed lending decisions.

Cash flow analysis gives lenders a more accurate tool for assessing risk than looking at traditional underwriting criteria, such as a borrower’s credit history. For borrowers with high debt-to-income (DTI) ratios, self-employment income, or short credit histories, cash flow analysis provides lenders with an additional tool to determine creditworthiness. With this other tool to gauge borrowers’ financial health, cash flow data can expand the market for lenders, enabling them to write more loans confidently.

While traditional spreadsheet-based methods of cash flow analysis can be time-consuming, lenders are increasingly adopting automation to simplify data aggregation and analysis.

The critical role of up-to-the-minute data in cash flow analysis

The accurate assessment of a borrower’s financial health hinges on up-to-date data. Derived from a detailed analysis of income, expenses and debt obligations, the DTI ratio represents more than just the current financial status of a borrower. It also acts as an accurate predictor of future financial health.

Rapidly changing financial conditions make real-time data essential for accurate loan risk assessment. The problems caused by outdated information are more than falling behind the competition; they range from missing lending opportunities to heightened default risks.

For lenders, up-to-the-minute data is all but mandatory, ensuring decisions are based not only on the borrower’s current financial health but on accurate future projections.

Benefits of real-time cash flow analysis

Real-time cash flow lending analysis brings a new level of precision to credit risk assessment, improving the lending decision process for everyone. With cash flow analysis software, lenders can better understand seasonality, measure non-traditional income, assess debt capacity and identify recurring transactions.

top three benefits of using cash flow analysis

Among its many benefits are that cash flow data and risk modeling help reduce credit risk, standardize data analysis, lower customer acquisition costs, and provide more comprehensive risk profiles. 

In addition, with standardized, up-to-date data analysis, lenders can ensure uniformity and fairness in evaluating loan applications with more consistent and reliable assessments.

Integrating real-time data analysis also improves cost-effectiveness and efficiency in the loan processing pipeline. Automation plays a key role here, streamlining processes and reducing costly, inaccurate manual efforts. This speeds up the loan approval process and reduces the potential for human error, leading to more accurate and efficient lending.

Ocrolus’ impact on cash flow analysis

Ocrolus’ cash flow lending analysis software is a game-changer for lenders, allowing the rapid processing of a broad range of borrower-submitted bank data. With automation and machine learning algorithms, Ocrolus expedites the process of capturing unstructured data from various sources and provides actionable insights to help lenders make highly informed decisions. Ocrolus offers more than 100 small business and consumer analytics to meet each lender’s unique underwriting needs for a complete picture of cash flow dynamics.

lenders guide how to become the best small business lender ever

Integrating various data sources like bank statements and tax forms, Ocrolus enhances comprehensive financial analysis. With automated cash flow analysis scoring capabilities, Ocrolus customers can also efficiently test new partner channels and increase marketing spend with consistently low application processing costs.

Ocrolus partner Lendflow is a perfect example of the effectiveness of the technology in enhancing lending processes. Lendflow’s integration with Ocrolus has led to a more streamlined, efficient approach to lending, particularly for small businesses.

By partnering with Ocrolus from day one, Lendflow has developed a unique solution that allows for more automation, a drastically reduced loan processing time and more accurate financial assessments. This solution has helped Lendflow customers leverage cash flow data to provide easier and faster credit access for various small business owners.

The significance of up-to-date, timely data must be balanced in a constantly evolving lending landscape. With real-time, automated cash flow analysis, lenders can open new doors to underserved markets like gig economy workers and foster more inclusive financial practices. This approach not only identifies new lending opportunities but also does so in a way that financial institutions can be confident and efficient in their decision-making.

Book your demo to discover how Ocrolus empowers lenders to manage risk and make smarter decisions based on a complete picture of borrowers’ financial health.

Key takeaways:
  • Cash flow analysis gives lenders a more accurate tool for assessing risk than looking at traditional underwriting criteria, such as a borrower’s credit history.
  • Up-to-the-minute cash flow data ensures lending decisions are based not only on borrowers’ current financial health but on accurate future projections of their ability to repay.
  • With real-time, automated cash flow analysis, lenders can identify new lending opportunities with added confidence and efficiency in their financial decisions.