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OnDeck’s credit scoring innovation ‘KOALA’ gives SMEs more credit access

by OnDeck Australia,   Apr 27, 2021

 

  • OnDeck’s innovative KOALA Score draws on big data, sophisticated credit algorithms, plus data from multiple credit reporting agencies, helping more SMEs secure the funding they need to expand and grow.

 

  • KOALA is believed to be unique in the Australian lending market and will be a game-changer for newer enterprises and sole traders seeking commercial finance.

 

  • OnDeck recorded an 11% increase in new loans in Q1 2021 following the introduction of KOALA, through its enhanced credit risk assessment, and this is projected to reach 20% by the end of 2021.

April 2021 saw OnDeck Australia launch KOALA Score™ – an innovative credit model believed to be unique in the Australian market.

 

KOALA, formally known as Key Online Australian Lending Algorithm, was developed in-house by OnDeck’s team of data scientists. It uses a sophisticated blend of credit algorithms and statistical techniques in combination with data from credit reporting agencies illion and Equifax, to support more granular credit risk assessment for Australian SME lending.

 

Business owner’s personal credit data can now be considered

 

KOALA gives OnDeck the ability to analyse the personal credit scores of business owners, which is a unique feature of the new credit model. This is a plus for newer enterprises, sole traders and partnerships, which typically do not have the substantial volume of commercial data required by traditional lenders.

 

In pilot trials of the KOALA Score™ conducted during the first quarter of 2021, OnDeck recorded an 11% increase in approvals for business loans up to $250,000, with the enhanced credit risk assessment provided by KOALA increasing confidence in loan amounts and duration.

 

In March 2021, 15% of customers received loan offers that extended the option of spreading the repayments over longer terms if desired. These outcomes reflect KOALA’s improved accuracy over previous credit models and improved confidence in client lending capacity.

 

Cameron Poolman, CEO of OnDeck Australia, says, “Previously our credit scoring was very commercial credit score driven, but KOALA uses a mix of commercial and consumer credit history plus cashflow, to build a more holistic risk profile.

 

“Moreover, the KOALA risk assessment model has been tailored to the Australian small business customer, and this granular insight potentially gives SMEs more access to funding they need, coupled with an uptick in lending limits.”

 

Increased finance opportunities for newer businesses, sole traders and partnerships

 

KOALA works particularly well for newer businesses that do not have extensive trading data to draw on. Cameron notes, “KOALA supports lending to fledgling enterprises and allows OnDeck to deliver even more opportunities for business finance – and potentially better commercial terms.”

 

Case Study: OnDeck funding helps Melbourne burger restaurant enjoy bigger bite of market

 

Having survived COVID-induced lockdowns through 2020, a fast-food restaurant in Melbourne’s north sought funding to expand and market the business.

 

The new KOALA Score™ enabled the business to borrow $125,000 as it factored in both personal and commercial credit history and the business’s strong cashflow.

 

Cameron says, “Because the owner’s healthy personal credit history was included, we provided a level of finance that met the restaurant’s funding needs.

 

“OnDeck made the application process easy. And thanks to KOALA, the business owner – a sole trader, who would likely have experienced great difficulty securing a similar level of funding, if any at all, through a traditional bank, now has the cash needed to promote and grow the enterprise.”

 

Credit scoring has always been part of OnDeck’s DNA

 

“Smart use of credit scores has always been part of OnDeck’s DNA as evidenced by the introduction of our proprietary scoring method the OnDeck Score© in 2015,” says Cameron.

 

OnDeck also provides a “Know Your Score” service to SMEs, allowing small businesses to check their Equifax business credit score online at no cost. Since launching the service in 2016 almost 20,000 small business owners have discovered their business credit score. “This information is vital to a business owner as good scores can be a key to new funding – and poor scores can be improved,” notes Cameron.

 

“We have now backed this up with KOALA, using the quieter environment of 2020 to drive innovation in our business. The development of KOALA – and its tailoring to the Australian small business landscape, highlights our commitment to the SME sector.

 

“KOALA is significantly more granular because it uses a greater range of data sources and ultimately enables us to offer loans to more Australian businesses, at a time when they really need it,” said Cameron.

 

Prepared by OnDeck Capital Australia Pty Ltd ABN 28 603 753 215 (“OnDeck”) for general information purposes only. Content may belong to or have originated from third parties and OnDeck takes no responsibility for the accuracy, validity, reliability or completeness of any information. Information current as at April 2021. You should not rely upon the material or information as a basis for making any business, financial or any other decisions. Loans issued in Australia are subject to the terms of a loan agreement issued by OnDeck. Loans are subject to lender approval. OnDeck® is a Registered Trademark. All rights reserved.

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