Establish a Credit Score

The results are calculated from the financial statement and balance sheet information provided by the prospective client. Quantitative data analysis is statistical and nothing is left for interpretation.

Bank provides a weight percentage (Weight %) or level of importance for each indicator and the software automatically calculates a credit risk.

Weight percentages are set according to bank policy.

Once the bank has decided on a weight percentage this information is LOCKED or hard coded so the banker can not change the weight %.

The weight percentage column can be hidden so the loan officer does not have access to that information.

Qualitative Credit Analysis

All of the questions in this section examine subjective information on the business, the owner, and the credit history of both.

This allows the bank to examine if there is anything outside the numbers that impacts risk. Assess credit risk from a non financial data perspective.

The bank provides a weight percentage or level of importance for each indicator and the software automatically calculates a credit risk.

The bank has the ability to customize the qualitative indicators according to bank policy based on industry sector. 

The software could be integrated with current bank systems and with credit agencies such as Credit Information Bureaus to further enhance credit analysis.

Example of some Qualitative Indicators selected by a bank.

Another example of some Qualitative Indicators selected by a bank.

Looking at the dropdown box for Management Quality you can see that if all decisions are made by the business owner the risk is greater than if key positions had been established and held for more that two years.

Z Score

The "Z Score" is an internationally accepted financial model that has been used for 40 years to determine the probability that a company will enter bankruptcy within any 12-month period. The Z Score is a reasonability test that allows your bank to look at another model to arrive at an overall credit score.

This "Z Score" was developed by economist Dr. Edward Altman, Professor of Finance at New York University in 1968.

This model provides an objective measure of a firm's financial health that can be used for credit evaluation and investment analysis.

"Z Score" is driven by a concept called the earnings multiple. Earnings multiple is the number of years of earnings that a potential purchaser would pay for the ownership of the business. The higher the earnings multiple the less the risk and thus the greater the quality of the earnings and business model.