The online SME lender has launched a new risk-predicting credit model which it said would support more tailored risk assessment for SME lending.
OnDeck has launched the KOALA Score (formerly the Key Online Australian Lending Algorithm), which it said was developed in-house by its team of data scientists.
The credit model would give OnDeck the ability to analyse personal credit scores of business owners, and would benefit newer enterprises, sole traders and partnerships that may not have the substantial volume of commercial data required by traditional lenders, OnDeck said.
The model uses big data, predictive analytics and statistical techniques, in combination with data from multiple credit reporting agencies including illion and Equifax, to provide tailored risk assessment for SME lending, OnDeck said.
According to the lender, in pilot trials of the KOALA risk model conducted during the first quarter of 2021, it recorded an 11 per cent increase in approvals for business loans up to $250,000 without taking on any additional risk.
OnDeck also reported that in March 2021, 15 per cent of customers received loan offers that extended the option of spreading the repayments over longer terms if required without increasing risk exposure for the client.
Commenting on the new risk model, OnDeck Australia CEO Cameron Poolman said: “Previously our credit scoring was very commercially driven, but KOALA uses a mix of commercial and consumer credit history plus cash flow to build a more holistic risk profile.
“Moreover, the KOALA risk assessment model has been tailored to the Australian small-business customer, giving SMEs more access to funding they need, coupled with an uptick in lending limits.”
Mr Poolman added that the model is suited for newer businesses that do not have extensive trading data to draw on, adding that it could present with “increased finance opportunities”.
Mr Poolman noted, “KOALA supports lending to fledgling enterprises and allows OnDeck to deliver even more opportunities for business finance – and on better terms.”