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Commercial Lending Moves Toward Continuous Underwriting

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Commercial Lending Moves Toward Continuous Underwriting

A commercial borrower’s finances keep changing after a loan is approved, as invoices are collected, inventory is purchased and payroll comes due.

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Continuous underwriting brings that activity into the purview of credit reviews. Payment receipts, account balances and operating records offer lenders information about repayment capacity between scheduled reviews, with implications for credit limits, financing offers and, should a borrower’s finances deteriorate, the prospect of intervention.

PYMNTS coverage documents efforts to connect business activity with credit decisions. PYMNTS Intelligence research supplies the backdrop. Businesses value flexible borrowing terms, while lenders report weaknesses in the information used to assess small firms. The research doesn’t measure industrywide adoption of continuous underwriting.

PYMNTS Intelligence’s report “The New Credit Playbook: Flexibility Fuels SMB Growth” found in November that small- to medium-sized businesses (SMBs) would pay an average of $126 annually for credit features such as dynamic limits or installment options. Businesses also planned 53% of their business card spending.

Adjustable limits affect purchasing capacity, while installment options spread repayment across defined periods. Both features connect credit terms to the way a business manages its expenses. Delivering them requires lenders to decide how much financing to provide and how repayment fits the borrower’s cash flow.

The need for that coordination extends beyond small businesses. PYMNTS Intelligence’s September Working Capital Index found that 83% of North American middle-market firms used a working capital solution.


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