Credit analysis and default risk calculations are leveraging the speed and accuracy of spreading with automation.
Commercial lending is experiencing many fintech disruptions that, in most cases, are quite welcomed by credit analysts and underwriters alike. Indeed, commercial loan departments are bringing an increasing focus to the digital transformation of many aspects of their processes, including the spreading of borrowers’ tax returns.
In this article, we take a closer look at:
- How tax automation technology is changing the game
- Enhance processes for commercial credit analysts
- Improves the accuracy of default risk calculations
- Where commercial lenders can access automated spreading technology
Table of Contents
Automation is Changing the Game for Credit Analysts
Credit analysis is the cornerstone upon which commercial lenders assess risk. Conducting a thorough and effective credit analysis depends on spreading the tax returns of the business being examined.
Automation is the new engine behind credit analysts’ ability to build reliable tax return spreads. This new technology extracts comprehensive data from tax returns automatically with just a few clicks of the mouse.
Automated tax return spreading assists commercial lending underwriters by compiling borrowers’ tax returns for credit rating purposes. Automated spreading is made possible by a specific technology called optical character recognition (OCR). OCR coupled with machine learning scans the tax returns of the business and pulls them into intuitive software interfaces that can be easily accessed, sorted and examined by underwriters right on the screen.
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Automated Spreading Enables More Accurate Default Risk Calculations
The rapid evolution and scale brought about by automated tax return spreading technology enables commercial lenders to perform spot screens, assess credit ratings and issue in-principle credit decisions rapidly — typically minutes, not days or hours.
While the speed of issuing credit decisions is immensely valuable, the benefits of commercial lending tax automation technology go much deeper. Automated spreading technology adds enormous amounts of time back on the calendars of commercial loan underwriters. This newly welcomed free time translates to more quality time that can be spent conducting thorough risk analysis of deals.
Commercial lending risk analysis includes data modeling from multiple views, ratio calculations and revenue and profit forecasting of the business in question. The goal of commercial lending credit analysts is to determine the likelihood that the business owner will, in fact, be able to repay the debt on schedule.
Since underwriters now have more time to spend performing rigorous credit analysis, they can more accurately calculate loss given default (LGD) models and the probability of default (PD). LGD and PD are two of the best overall metrics commercial loan officers’ use to assess default risk. With automated tax return spreading technology, these metrics can be arrived at more accurately and more quickly compared to older manual methods.
FlashSpread is Raising the Bar When it Comes to Automated Spreading
Commercial lenders are increasingly leveraging the power of tax return spreading automation to back only the strongest borrowers and deals. Learn more about FlashSpread’s automated tax return spreading platform today!