5 Great Ways to Determine Your SME Customers Creditworthiness

   2021-04-25       37        Finance
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Whether you’re a bank, an alternative lender, or some other financial institution, you want small and medium-sized enterprises to take out and repay loans.

Whether you’re a bank, an alternative lender, or some other financial institution, you want small and medium-sized enterprises to take out and repay loans. Though you can make money by collecting interest and fees on the given loans, lending funds to the wrong applicant will result in losing money. So how you can determine whom to approve for a loan.

Underwriting is the process a financial institution uses to decide which business applicants to accept or deny and what terms to offer on its loans. In a nutshell, it is the process of determining a borrowers’ creditworthiness.

Since providing loans to small and medium-sized businesses can be risky, it’s vital to gather and analyze data from a variety of sources before making a decision.

What Factors do Lenders Look At When Determining SMEs Creditworthiness?

Get Information from the Application

When SMEs submit a loan application, they provide lenders with a variety of information such as name, address, annual revenue, business history, and more. You can use this data to help identify your borrowers’ identities and pull their credit reports.

Some of these metrics are a great way to determine an SME’s creditworthiness. For example, you can compare an SME’s annual revenue to its monthly debt obligations from credit reports and an SME’s monthly rent and utility payments to determine the income to debt ratio. This ratio could help it decide how much additional debt a business can afford to take on.

Author Signature :


My Name is Peter Thiel and I am freelancer content writer, I like to write content related to business, finance and technology.


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