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Identifying how much to lend before rotating the gears ahead

We all are aware of the growing interests of large and medium businesses towards financing their daily needs via Asset based financing ranging from financing via factoring to Asset based borrowing.

Over the years, many banks have started giving weight to Asset based financing, which is evident from the returns this has given to them YoY as compared to e.g. S&P index, also keeping in consideration the factors like lower Default ratios of .03% as compared to more than 2% in traditional financing.

We can lower this further, if we gauge the client and its abilities to make payments beforehand during the prospecting. Every borrower will have a spread being maintained by organisations like Moody's etc. This spread will give the actual picture of the borrower's financial structure. If our underwriting models or rating models can integrate this spread data at every stage of the Loan cycle, then we can get deeper into borrower's pockets and avoid any defaults thereby reducing the related metrics.


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