How Codat can help reduce risk

Is there a way to level the lending playing field for both SMEs and financial service providers?

With a rise in new business incorporations emerging in the wake of Covid-19, so has a demand for financial backing. But with lending processes tightening over the last few months due to the pandemic, records are showing that out of 769,137 applications made by November 2020, only 608,069, worth £18.5bn, had been approved.

As the effects of the virus are still rippling through our economy, lenders are having to become increasingly risk averse. The requirement for more documentation, qualification concerns, and a hesitancy to increase credit limits are just some of the hurdles SMEs are having to navigate in their search for backing. And all of these issues are manifesting when small businesses are in need of access to loans faster than ever before. 

There is a solution

In a time where the degrees of demand vary so often, intelligent and simplified lending is almost certainly the answer. Many lenders are now recognising the need to find new ways to show they understand their customers’ businesses in order to properly support them in the modern world. And now more than ever, lenders and SMEs need to have access to more advanced and detailed analytics that are able to provide a real-time insight into the financial well-being of a fledgling business.

By getting closer to the customer, lenders would be able to develop a deeper understanding of a small business’s needs, desires and ever changing situation. Not only could this help lenders gain a clearer picture of any associated risks, but by shifting the focus from being nothing more than a line of credit to one of a trusted advisor, lenders can become an even more integral and valued part of an SME’s journey.

How Codat can help

Codat is making life easier for small businesses every day, by enabling their systems and services to work together seamlessly. This includes allowing lenders to monitor business data in real-time and on an ongoing basis, resulting in:

  • Increased accuracy: By utilising real-time data from different sources, lenders can ensure their credit risk decisions are more accurate
  • Greater understanding of the full picture: Lenders can use accounting,commerce and bank data to build a full picture of their customers’ financial health, reducing risk exposure
  • Staying up-to-date: Once business customers provide consented access to their financial software, lenders will have access on an ongoing basis, allowing them to flag key default indicators early

Codat’s Visualise product uses real-time accounting data to expose the key credit risk trends and performance indicators of a business, in a simple and easy to consume format. Lenders are able to monitor a range of contextual metrics in order to identify upsell opportunities. These metrics include: 

  • Average payment terms
  • Average days to pay
  • Concentration % of each customer & supplier
  • Paid vs. outstanding costs
  • Average invoice/ bill value

There is also the option to explore the details of profit and loss and balance sheets, compare periods and drill down into an entire trading relationship with a particular supplier. 

By streamlining this normally complicated process, lenders are able to focus on offering their customers a more tailored service, and the SME is able to spend more time growing their business and less time dealing with admin tasks or financial worries. 

Codat in action

One example of Codat’s success in working with lenders is Clearbanc. They are the fastest, most affordable way for direct-to-customer and SaaS founders to fund their businesses and the largest eCommerce investor in the world.

Before partnering with Codat, Clearbanc faced three main challenges; a lack of complete financial data, a need for a holistic view and a desire to enhance their customer experience. 

Through Codat, Clearbanc obtains read-only access to their customers’ accounting software platforms, enabling them to track financial performance and operational nuances using soft metrics and metadata. Clearbanc customers are also able to share their accounting data via an API, in keeping with the digital experience already available to them.

Speaking of the partnership, Director of Operations, Ben Brideaux said:

“Accounting data is a critical part in making the best investment decisions for Clearbanc’s customers. Codat’s API allows us to quickly assess accuracy and risk while at the same time maintain our streamlined application process.”

Try it out today

To start your 30 day free trial, please visit signup.codat.io