Banks and SMEs: Embrace Innovation!
SMEs are often at a disadvantage when it comes to financing. They don't have the resources available to larger companies, having limited assistance and knowledge to help them grow their business. Access to financing is more than essential for most SMEs – given the intense competitiveness these days, it means survival.
A lending institution such as a bank, on the other hand, needs to form a strategic understanding of each SME-borrower in order to accurately rate the business’ creditworthiness. Thorough assessments include adequate information on past projects, future plans, management quality, financial performance, and industry outlook. Such assessments go beyond credit scoring, this process assigns actual qualitative valuation to a company and as such gains the label Credit Risk Rating.
Traditionally, lenders do not let business owners know how they rated beyond a very brief “approved” or “denied” loan application result. In reality, knowledge of its business credit risk rating would be of significant benefit to the SME business owner. He learns what creditworthiness is all about in the context of his own business and is given the opportunity to translate this knowledge into managing his business accordingly.
Today, the credit rating process is enabled by information technology such as the Software-as-a-Service CreditBPO Rating Report©*. Generated in 24-48 hours are the credit risk rating and actionable recommendations that collectively consitute a roadmap the SME can follow toward improving its creditworthiness. This online rating solution benefits both banks and SMEs in many different ways, not least of which is bridging the credit information gap that has kept lending to SMEs at a lamentable level for decades. (Businessworld: “Disruptive innovations that help small firms get loans”)
Technology now more than ever is a great enabler. It has allowed startups and SMEs to carve out thriving markets in what was once the exclusive domains of large enterprises. That said, SMEs have to embrace innovation and optimized management if they hope to compete at all. At the same time, banks/ lenders cannot continue to make loan applicants wait weeks for a credit decision or they risk hurting their bank’s brand and eroding customer goodwill.
Finally, the opportunity for jumpstarting SME development into national sustainable growth is at hand and government is the likely catalyst for it. Technology must be used as an integral part of government intervention programs to garner interest, optimize results and spread benefits. An instrumental possibility in such an endeavor would be an objective and transparent IT-enabled credit rating platform, ideal for evaluating vendors, suppliers, and bidders. The spread of such a platform would quickly gain steam as support is gathered throughout the country in pursuit of an ever more competitive nation-contributor to the integrated ASEAN region.
The ability to network both domestic and international businesses requires common ground in business. As such, being able to describe the valuation of companies in a common language thanks to CreditBPO Rating Reports would be both catalytic and instrumental.
*The CreditBPO Rating Report is copyright-registered with the U.S. Copyright Office.
“Technology Company of the Year” finalist, Asia CEO Awards 2015.