Thanks to new technologies for harnessing bank transaction data, these are no longer pie in the sky wishes. With digital innovation in income and expense verification, lenders can make instant decisions on the financial capability of a prospective small business customer without the arduous task of sifting through hard-to-get financial paperwork.

For the many lenders who have experienced significant blowouts in loan application turnaround times this past year, the ability to speed up decisioning couldn't come soon enough. Small business owners getting speedy access to funds using a vastly improved user experience are less likely to jump ship or be lured by the speed of online fintechs. 

Equally, there's now the opportunity for mainstream lenders to repair the disconnect between sales and credit caused by clunky onboarding practices that make it challenging for sales to convert prospective customers. 

How instant income and expense verification works

The lender invites the customer to follow a link to a web-based screen where they consent to share their bank transaction data for funding application purposes. Automated technology de-duplicates account transfers, and machine learning is applied to identify income sources and classify expenses. 

Within minutes, the lender receives a reliable and consistent snapshot of the applicant's transaction history. After categorisation and analysis, the data is returned to the lender in an easy-to-understand format as an affordability report or a data feed ready for integration into their existing credit assessment workflow via API. 

Rather than lenders having to gather the information and spend significant time reconciling and merging data from various sources, the technology does the work for them, summarising historic banking records into a quantitative credit decisioning framework.

Automated affordability calculation for SME lending

The Equifax Affordability Report is tailored to give maximum value to commercial credit officers and brokers, using bank transaction data and business intelligence to answer common questions about what a business has earned/spent and assist with determining proof of operations via account inflows and outflows. With 500 plus decision points available to support affordability calculations, the solution can easily be aligned to a lender's risk and financial vulnerability and boasts broad coverage across Trans-Tasman banks, mutuals, credit unions, building societies and non-bank lenders. 

The solution also connects with WINZ and myGov to offer market-leading access to Medicare, Centrelink and ATO data. Encryption and bank-grade security protect the customer's financial data once captured from the financial institution and shared with Equifax. 

Enabling low cost, flexible funding options

Digital affordability solutions that harness income and expense data instantly from bank transactions offer a way forward for lenders to quantify risk more effectively. 

The leveraging of new consumer-permissioned bank transaction data sets enables a more granular assessment of affordability and expenditure for more predictive and inclusive credit outcomes. Every transaction tells a story and can reveal patterns and signals indicating credit repayment ability. These signals are all indicators that can help divulge more about where prospective SME borrowers sit on the scale of risk, including thin file borrowers or applicants who lack fixed assets to lend against. 

This increased visibility into commercial cash flow will help define a future vision for small business lending, which is as profitable as it is responsible, and as efficient as it is service-focused.

Find out how the Equifax Commercial Affordability Report can give you fast outcomes and confidence in SME credit decisioning. Talk to us today.

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