OnDeck develops innovative risk management model to help SMEs to access credit

by Mike Wood28 Apr 2021

OnDeck, the fintech SME lender, has launched a new tech feature that is set to totally reimagine the way in which they approve small business loans.

The Key Online Australian Lending Algorithm, or KOALA, will come into effect as part of the way that OnDeck approves SME credit, and is thought to be a unique offering in the commercial lending space.

It will utilize big data, predictive analytics and stats, combined with data from credit reporting agencies such Illion and Equifax to make intelligent decisions about loans.

According to OnDeck, this will allow for SMEs to apply for credit and have outside factors, such as their personal lending history and credit score, be taken into account by KOALA. OnDeck are confident that it will create a more rounded view of the SME than traditional models.

The new system has been trialled in the early months of 2021 and resulted in an 11% rise in loan approvals without adding to risk, a number that is expected to rise to 20% by the end of the year.

The capabilities of the KOALA Score™ give OnDeck Australia a distinct market advantage and improves our approval rate and average loan offers,” OnDeck CEO Cameron Poolman told Australian Broker. “Also, none of our loans have security due to the confidence we have in the model. This is unlike our competitors that will ask for security at different loan sizes.”

“Moreover, KOALA allows OnDeck to deliver more funding to a broader range of SMEs without taking on additional risk. This means OnDeck is able to provide opportunities for loan finance – including additional term options to a greater variety of SMEs in particular newer businesses that do not have extensive trading data to draw on, as well as sole traders and partnerships, which typically find it difficult to secure commercial finance through mainstream banks.”

“To the best of our knowledge, no other online SME lender is working with the level of detail that KOALA provides – looking at both personal finances and taking a multi-bureau approach, when assessing SME finance applications. From an industry perspective, KOALA is allowing OnDeck to help level the finance playing field for very small or very new enterprises and their brokers.”

“This makes KOALA good for OnDeck as we can now lend to a broader range of SMEs, but also good for the SME and broker communities. Small businesses can now access the funding needed to achieve growth amid the economic recovery we are seeing take place in 2021, and brokers are able to serve the needs of a broader range of SME customers.”