“Wiserfunding gives us a complete and uniform tool for analysis that should be the industry standard. It blows away anything I’ve seen for credit reporting.”
Who Are Lenderwize?
Lenderwize is a digital marketplace that enables small to medium-sized telecom businesses to optimize cashflow through flexible invoice factoring. Many of these businesses struggle to overcome a cashflow gap of 50 days or more, as suppliers require payment within 7 days while customers typically pay within 60 days. Lenderwize enables their clients to solve this problem by accessing on-demand loans from accredited investors using their receivable invoices as collateral.
Objectives
Lenderwize needed a solution that:
Generate fast, highly-accurate risk assessments for potential borrowers
Reduce time-to-funding by streamlining applicant screening and credit scoring for risk review
Build trust with key stakeholders by reducing the friction of portfolio reporting to Lenderwize’s investors and insurers
Gain confidence in the quality and accuracy of risk assessments by implementing an SME-specific risk assessment tool
Challenges
Invoice factoring for digital businesses is a new, fast-growing asset class, and Lenderwize is expanding it to new investors and businesses.
Not only does validating and securitising invoices require a highly reliable risk assessment tool, but the stakes are higher; investors don’t have historical experience with it, so the stakes for building trust are even higher than normal. Lenderwize needed a credit analytics tool that could accurately predict risk for their borrowers so they could rapidly screen new candidates, confidently maintain a profitable loan portfolio, and build trust in the digital marketplace amongst lenders and borrowers.
Solution
Automating client validations
When a customer applies to Lenderwize, their application must be validated via a number of different data points. First, Wiserfunding validates the customer’s details against third party data, like Companies House. Once validated, Wiserfunding performs a risk assessment using the borrower’s data to generate a series of risk ratings: the candidates SME Z-score, Bond Rating Equivalent (BRE), Loss Given Default (LGD) and Probability of Default (PD).
Empowering the credit committee
Once the client’s application has been validated, Lenderwize’s internal system automatically generates a tentative decision with a pre-approved credit limit based on the candidate’s SME Z-score. The tentative decision is passed to the credit committee with the candidate’s full risk assessment provided by Wiserfunding.
Reporting to investors and key stakeholders
Lenderwize needs to transfer high amounts of working capital in order to make their model work, which entails regular reporting to their investors and insurers when new loans are originated. Before, the credit committee compiled a variety of risk assessments and added their own commentary to reconcile differences and justify the decision, and each reporting cycle required 14 days. Now, the team sends along the same report from Wiserfunding’s portal that was used to make the credit decision and has reduced decision-making time to 3 days.
Results: Quick screening for profitable scaling
Safe, profitable scaling. Lenderwize has processed €400mn worth of loans through their platform in the last 2 years with only 0.05% in defaults.
Rapid decisioning. Customers applying to Lenderwize face a cashflow crunch, and every day counts. Most borrowers would have limited financing by traditional banks, and would typically wait weeks to have a loan disbursed. With Wiserfunding, Lenderwize is able to give applicants a decision in under 48 hours, and approved customers can access their money within 96 hours of approval.
Lean operations. Lenderwize’s entire operation is digital, and Wiserfunding has enabled them to automate 95% of their credit decisioning process using the new API-led platform. They have been able to process over €400mn on their platform while maintaining their headcount at 16 people, with only 3 dedicated credit employees – over €200mn processed per credit employee.
Cheaper, standardised data. Before Wiserfunding, Lenderwize would use 3 distinct credit reporting agencies to make their lending decisions, which increased both the costs of accessing and reconciling the data for their credit committee. Now, Lenderwize has been able to reduce the cost of analytics and the operational friction of interpreting conflicting data reports.
Trusting relationships. Building a digital lending marketplace for a new asset class comes down to gaining trust amongst borrowers, lenders, and importantly, investors alike. With a platform that delivers the greatest sector-specific accuracy built on 5+ decades of academic research, their partnership with Wiserfunding has built confidence with investors and lenders in the category’s long-term viability. Since partnering with Wiserfunding, Lenderwize has raised €100mn from investors to continue scaling.
Read the full case study here.
“The quality of their risk ratings is superior to anything else I’ve seen, and the data they expose enables our credit committee to make faster decisions. We use Wiserfunding for better intelligence and confidence in the quality of our decisions.”
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