Case Studies, Underwriting

28 Jul 2023

Better lending decisions, faster financing

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Michael Jenkins

Product Marketing Lead


*This case study is anonymized at the request of our customer

For years, traditional banks have not effectively loaned capital to start-ups. VCs are valuable in getting companies started, but they require equity as a tradeoff. Chasing down subsequent rounds of financing also takes focus and resources away from the founder and chief executives who need to be driving growth and execution. 

All of that is changing, though, with a new innovative capital provider for SaaS and SMB’s (“Capital Provider”). This Company currently boasts:

  • Billions of funding made available to the best SaaS companies across the US and Europe
  • Thousands of companies registered on their platform
  • 5,000 plus months additional runway generated 
  • 110 employees in 14 cities around the world
  • 10 countries in which they operate

With their advanced lending platform, the company is challenging the traditional financing paradigm. They’re making it easy to turn recurring revenue into flexible growth financing by providing cost-efficient, flexible working capital and allowing startups to spread out large payments.

How are they delivering all of these innovative lending products to founders? By taking a fresh approach to the process with a cash-flow based decisioning engine. 

The Challenge

This company identified three key value propositions they wanted to deliver to their customers through a new cash-flow based financing approach: 

  1. Faster access to funds
  2. Competitive rates
  3. An efficient, quick underwriting process

To do this, they needed to build from a new data set: enter bank data, also referred to as ‘transaction data’. By using bank data, this company would be able to more accurately assess the credit risk of their customers by looking at things like recurring revenue, and specific incoming and outgoing expenditure types. 

However, raw transaction data comes unstructured, with inconsistent schemas depending on the bank or payment processor, and it never includes a native transaction category or label. 

This company quickly realized that the process of categorizing bank data would take away valuable resources from their core financing product. Why? Because at scale, normalizing and categorizing transaction data requires the development of specific data models and the specialized teams to build them. 

The Solution

Instead of trying to solve their need for transaction categorization independently, this company decided to seek a partner. They had no margin for error, though. With the above value propositions identified, they had three core requirements for an enrichment partner:

  1. Real-time processing and delivery of enriched data
  2. Accurate merchant information and transaction labels
  3. Reliable results with low error rates

Through their evaluation of several solutions, they found that the Ntropy API provided the fastest real-time delivery of accurate merchant information, with reliable labeling of transaction types. Almost over-night, this eliminated their need to spend time and money to build this in-house. 

"Bank data is one of the most reliable sources of information about a company’s financial health. When we first set out to improve how growth organizations can access capital, we knew we needed to do it differently, and understanding this transaction level data was a prerequisite. With Ntropy, we’re able to process and analyze thousands of bank transactions from our customers a day, and most importantly, deliver a financing product that helps them grow their business more efficiently.” - CEO of Company

The Results

In partnership with Ntropy, this customer has become a market leader for SaaS and SMB capital financing. For them, the results of the partnership are clear: 

  1. Increased speed in which they can assess credit risk
  2. More accurate and robust lending decisions
  3. Reduced underwriting time

For their rapidly-growing customer base, this means access to capital that allows them to invest in growth without having to dilute equity value or take away valuable time from product and strategy growth.

For more information on how you can leverage Ntropy’s API for fast, accurate and reliable transaction enrichment, please reach out here. We can’t wait to show you how good your bank data can be.  

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