Credit risk case study

Take a look behind the scenes of credit approval

Julie Marron, Associate Credit Director, UK SME Credit, shares insight into the credit approval process.

When a broker applies for business financing at the bank, the next and final step is gaining the approval of the credit risk team.

Working alongside a Business Development Manager, brokers can do more than they realise to secure credit approval. Julie Marron, Associate Credit Director, UK SME Credit at Barclays, says ‘the more relevant information brokers can supply to support an application, the greater the chances are of them gaining the right outcome for their clients’.

Every case is individual. We do have ideal parameters for lending on a consistent basis within sectors, and while we generally follow them we do have flexibility, Julie says. 'We look at mitigating factors and the strengths and weaknesses on a case-by-case basis'.

Telling your client’s story

One of the key aspects of the underwriting process is that it is not automated. Remember that there is a person at the other end of your application who doesn't know your client like you do.

Applications generally include the customer background, the reasons why the finance is required, how the money will be used and whether the business can afford the repayments. It also helps to share the softer details such as the client's goals and aspirations, and their ability to deliver them. Build the story so it can be considered fully by our team of experienced lenders as they make their decision.

The better you describe the business and its strengths and weaknesses, the quicker the credit risk assessment team can assess the application on behalf of your clients. Also, the more knowledge a broker can supply to help the credit team make the decision, the more likely it is that the customer will get a favourable outcome.

Julie says 'irregularities' that are discovered later on in the process can cause delays and even a decline if vital information is not presented in an open and honest way from the start. For example, if someone says they are a discharged bankrupt at the outset of the application and explains the background, we might still proceed with caution, she says. However, if this information is revealed later, and it's a borderline case, integrity does have to come into question.

Speeding up the process

With all the information up front, a credit decision can usually be made within a few hours. Julie explains that if the team has to go back for more information, it can stretch to a few days or possibly a little longer. 'If we have the accounts from the last three years and we see that in year two they made a loss, then share an explanation for that', says Julie. 'It speeds up the process if you don’t just tell me what's in the application, but tell me why'.

What are some other important areas for brokers to help flesh out in advance of a submission, in order to make the process as smooth as possible for their clients?

Julie explains that understanding the experience and ability of the business owners is important for the credit team. It’s also good to know if there is a fall-back option, such as an unused asset, that could be leveraged if the business struggles to make the repayments. Having a clear picture of the overall assets, liabilities and commitments is really important.

What about affordability?

'We pride ourselves on being responsible lenders so we need to know the customer can afford the repayments', says Julie. 'If a broker shows us that a customer can't afford them from the business' current performance then tell us what will change so they can afford the repayments in future'. Forecasts for future business performance are often submitted as standalone documents. However, Julie says that forecasts are more helpful when they include details of the underlying assumptions, such as the business's management and its potential. It's also useful if forecasts include profit and loss, cash flow forecasting and balance sheet projections.

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