Lending companies are only able to make a profit if their clients pay back their loans. But how do you know which client to lend to? And how much to lend? These are the type of questions that can make or break a financing firm, and that’s why Business Backer, a lending firm for small businesses, decided to tackle these questions head-on. While the company has had considerable success—they have secured $130 million in funding to more than 4,000 small businesses across the United States–they wanted to take guesswork out of the equation.
To answer their questions, they turned to Albert Fensterstock, Managing Director at Albert Fensterstock Associates, who specializes in improving risk analysis capability and collection department efficiency. Fensterstock, in turn, relied on Palisade’s NeuralTools software to help Business Backer begin refining their decision-making process. “I’ve used Palisade’s products for years,” says Fensterstock. “And I used it this time to answer a two-fold problem: How to make a loan with less risk, and how to come up with an appropriate credit limit.”
Specifically, Fensterstock used NeuralTools and StatTools to discover the most predictive variables when evaluating a potential client, as well as to determine how likely a debtor was to pay back a loan, and how much they were best-suited to borrow.
Overall, the models Fensterstock developed for Business Backer set an impressive precedent. “I’ve been doing this kind of work for 22 years, and I’ve never before built models that were able to do this in one task,” he says. “This model is better than anything I’ve ever developed.”
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