AUCKLAND, New Zealand, April 2, 2012 /PRNewswire/ -- One of the outcomes of the global financial crisis is a growing awareness of the importance of Small to Medium Enterprises (SMEs) as engines for growth in modern economies. As large corporate and governments alike shed jobs by the thousands, economists are looking to the SME's to re-start hiring and kick-start economic growth.
In Europe, the UK, and the US, extraordinary funding is being pumped into the banking sector in an effort to ensure that necessary finance is available to the important SME sector. Unfortunately, the pump is not efficient, and most agencies have been disappointed with the amount of funding that is actually being deployed through to the SME's.
One reason that this funding flow is constricted is that retail banks have traditionally focused on personal and mortgage lending, and lending to the smaller business sector has been a secondary focus. The culture, skills, data and processes that are required for large scale SME lending are simply not present in most lenders on the scale required.
In order to lend profitably, the lenders have to be adept at assessing which sectors have local competitive advantage and therefore have the best opportunities for growth in a global market. Within these chosen sectors, the lenders then have to filter out losers and pick winners.
This challenge is difficult enough within a single sector, but there are hundreds of sectors in an advanced economy like the EU. Lenders must acquire market information that accurately portrays the sectors on both a global and a local basis in order to pick strong growth sectors, and then analyse sufficient financial information to be able to predict the financial performance of individual companies over the term of a commercial loan. And this has to be done quickly and cost effectively - and most importantly, it needs to be done today!
Developing the culture, skills, and processes needed to make these judgment calls on a daily basis is a huge undertaking for any organisation that has not already been immersed in the task for many years. And even if the capability does exist within the lender, scaling it up through hiring and educating a new cohort of commercial lending managers is a massive and time consuming task which is not compatible with the massive cost reduction programs currently being implemented in response to the GFC.
The result is that lenders are struggling to meet their SME lending targets at a reasonable cost and without compromising profitability and/or asset security.
This is where NSA comes in. They provide an internet based service to lenders that delivers high quality loan deals from borrowers carefully selected from niches that appeal to the lender's broader market objectives. This provides superior quality loan prospects at a lower cost than the lenders can currently achieve themselves. And NSA can deliver this service today. The result is a fast and efficient lending cycle that reduces lending risk while providing a better interest spread for the lender than standard mortgage lending. Loans to date are approximately EUR1billion and increasing rapidly, with an outstanding track record with regards to loan performance. In fact the default rate experienced among these deals is about one/tenth of the average in the relevant market segment.
How does NSA do it?
There are several important elements to the service -
- Prospecting candidate segments, and then borrowers within the segments;
- Selecting and assessing individual prospective borrowers;
- Assessing potential loan deals on offer;
- Assessing the deal fit with the lenders preferences;
- Individually verifying the borrower's current position and deal information through both personal contact and market research;
- Ensuring that the loan complies with legislative and bank contract parameters.
All of the above is automatically written into an informative, accurate, and stylish report that is easily consumed by the lender and quickly converted into a loan.
The cycle time is measured in days.
Idiom technology plays a key element in many of the above steps, and is used to deploy NSA's proprietary financial knowledge to consultants in the field. The technology used includes Idiom Decision Manager, Idiom Forms, and the Idiom Document Generator.
The Idiom Decision Manager is used to initially convert the financial profile of all potential borrowers into a series of nearly one hundred standardised indexes which have been carefully selected by NSA for their ability to predict financial strength and management competence. These indexes are used by the system to initially filter prospects, and is the start of a process that has a very high acceptance ratio with the lenders, and which results in outstanding loan performance.
Next the prospective borrower is electronically analysed in detail, with the results made available to an in-field NSA Consultant via Idiom Forms. The consultant extends and reviews the analysis via the Forms and, if they are satisfied with the result, they approach the prospect with a deal.
If the prospect is interested, the same Form is used to conduct and capture a one-on-one interview with the prospect. Decision Models that are built using the Idiom Decision Manager sit behind the Forms, and are executed in real-time on a field by field basis (similar to an Excel spreadsheet). The interview responses are analysed in real-time, leading to additional and relevant questioning where necessary, while at the same time presenting an ongoing and immediate loan assessment to the consultant. At the conclusion of the one hour interview, both the consultant and the prospect are clear on the outcome - the loan will be presented to the lender (with likely acceptance), or it will not. This unique blend of automation decision making and trained consultant interview ensures very high quality information and loan assessment.
In the event of a positive outcome, the Idiom Document Generator is then used to generate a 'Report'. The Report is the critical outcome that will be consumed by the lender, and which will lead to a loan being made in more than 85% of all applications. Again the Document Generator is supported by Idiom Decision Models, which in this case are used to derive important variables for inclusion in the report, and to drive the composition of the text itself to produce a concise, informative and accurate 20-30 page report, inclusive of graphs and charts that present in clear terms the relative position of the prospect and the relative quality of the deal within the sector.
The result is a fast, efficient, and cost effective process that delivers high quality loan deals to lenders, to the benefit of the lender, the borrower, NSA, and last but not least, the local, regional and global economies. For more information on how NSA or Idiom can help with advanced financial broking in your market please contact:
© NSA Spa - Registered Office: Via Conservatorio, 30 20122 Milano, are a boutique financial intermediary providing advanced loan brokering services, primarily between Banks and 'small to medium enterprise' commercial clients. For more information please visit the NSA website www.nsaweb.it
Idiom Limited is the author of the Idiom Decision Manager and other products described above. For more information please visit the Idiom website at www.idiomsoftware.com.
For Further Information contact
Phone: +64 21 434669
SOURCE IDIOM Limited