A new Era of financing for SMEs and Banks

Access to financing is essential for the development and growth of SMEs. However, many of these businesses face major difficulties in obtaining financing from banks, due to bureaucratic processes, collateral requirements, and lack of financial knowledge necessary to navigate through the complex terminology of financial institutions. On the other hand, banks face challenges in expanding credit to SMEs due to high processing costs and associated risks.

The crucial role of a Credit Scoring tool

An advanced credit scoring tool represents the foundation of an efficient risk assessment system. It uses machine learning algorithms and artificial intelligence to analyze a wide range of financial and behavioral data. By integrating such a tool, financial institutions can obtain a clearer and more up-to-date picture of their customers’ financial behavior, leading to an increase in funding rates and promoting a healthier economy. One of the main advantages is the reduction of fraud and default risk. By carefully analyzing alternative data, potential fraud can be more easily identified.

Contribution of iFactor Pure Analytics in Credit Risk Assessment

iFactor Pure Analytics relies on advanced data analysis and cutting-edge technologies to provide banks and financial institutions with detailed and relevant information about a business’s current performance and growth potential.

In the analysis process, iFactor Pure Analytics uses alternative data sources such as social networks, psychometric profiling, digital footprint, and transactional behavior to streamline the lending process, reduce fraud and default risks, and optimize financial analysis.

Challenges faced by SMEs

• Limited or nonexistent access to financing: Many SMEs find access to financing extremely difficult due to complex banking processes and strict requirements.
• Bureaucratic and unfriendly loan applications: The loan application process is often complicated and time-consuming, which can disrupt the daily activities of SMEs.
• Lack of collateral and guarantees: Banks often require guarantees that SMEs cannot provide, making it impossible to obtain a loan.
• Lack of financial management literacy: Many entrepreneurs do not have the necessary knowledge to understand and navigate through rigid banking terminology and processes.
• Increased payment terms due to economic context: Inflation and price increases exacerbate the difficulties for SMEs in paying their suppliers, employees, and taxes.
• Currency or geographical barriers: SMEs operating in international markets face challenges related to currency fluctuations and geographical barriers.

Challenges for Banks

• High processing costs for SME loans: Banks face high processing costs for SME loans due to the large volume of requests and the small size of the loans.
• Lack of digital tools for risk assessment: Risk assessment and loan underwriting remain manual and time-consuming processes.
• Complex IT infrastructures and outdated software architectures: Old and complex systems hinder the automation and streamlining of banking processes.
• Long and complex approval chain: The loan approval process is often slow and complicated, leading to delays and inefficiencies.
• Lack of digital tools for SME products: Banks do not have the necessary digital tools to support efficient collaboration between sales and risk departments.
• False positives and false negatives in loan applications: Many loan applications are incorrectly rejected, while others are mistakenly approved, negatively affecting the lending business.

Implementation of Solutions

Automation of Lending Processes: Using an advanced credit scoring tool can simplify and speed up risk assessment, reducing costs and processing time for banks.

Transparency and Security: Blockchain ensures transparency and security of transactions, eliminating the risk of fraud and providing a secure environment for both parties.

The contribution of iFactor Pure Analytics in credit risk assessment

iFactor Pure Analytics relies on advanced data analysis and cutting-edge technologies to provide banks and financial institutions with detailed and relevant information about the current performance and growth potential of a business.

iFactor Pure Analytics uses alternative data sources such as Social Media, Telecom or Psychometric profiling, Digital online Footprint, and Transactional Behavior (Open Banking) to streamline processes, reduce fraud and default risks, and optimize the credit process. 

Therefore, iFactor offers a robust software solution that helps financial institutions perform faster and more detailed analysis of small and medium-sized enterprises (SMEs) and large companies that apply for credit, and identify financing opportunities for them.