Validus has made key improvements of its credit assessment framework over time, through both intelligence gathered via historical lending, which helps to calibrate our model and the algorithmic rules run on loan applications, as well as digitalization of the credit assessment, both limiting human intervention and room for error, and looking at historical indicators and key parameters that identify defaults and successful repayment.
We run additional fraud checks and assessment, which through our fraud risk algorithm to check that submitted documents are not tampered with, and to test the consistency of financial ratios to verify against manipulation of raw accounting data.
If an SME passes our fraud assessment the application would then proceed to pass through our credit risk assessment.
Our credit risk assessment consists of 4 components: Industry, Company, Individual, and End Buyer.
- Industry: We’ve partnered with NUS CRI (Credit Research Initiative) which will provide us with quarterly reports on the probability of default of SME firms.
Company: We’re doing a credit evaluation through short term metrics based on historical financial data, cash flow, and transaction level data derived from bank statements.
Individual: We are evaluating directors through their personal credit bureau reports to measure the willingness of the key man to pay where we will run their credit bureau report through an algo- processing 100 different intermediate variables.
End buyer: We source the paydex to measure the payment promptness of the End-buyer.
Based on our credit risk assessment our borrowers will have a risk grade from 1-10. We only accept a risk grade of 1-7 and reject anything above.
Within the aforementioned four categories of assessment, due diligence is enhanced to include several additional assessment criteria:
- Data on real cash transactions via a bank statement module
- Data on contracts won, terms, and historical relationships with Buyers via proprietary procurement data received from our partners on a broad universe of vendors and suppliers
- Checks via MyInfo API integrations on business history; minimum threshold checks against ACRA-registered businesses that have been in operations between 6 months (Working Capital Financing) to 2 years (Invoice Financing and Purchase Order Financing), paid up capital thresholds, Director/Keyman minimum shareholding, business entity type, and sector checks against restricted industries
- Bureau reports of the SME and the individual who owns most of the SME
- Average daily outflows of cash, with checks on related party transactions
- Average bank balance of past 6 months
- Court history checks to confirm that no negative litigation has occurred for the past 2 years, and past bankruptcy checks against the Guarantors and Directors/Keymen
- KYC - proof of identification and address
- Compliance checks - no stale invoices, transaction level verification
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