Computerized credit analysis

Abstract

Purpose of Study: The purpose of this study is to develop a model (procedure) to assist a loan officer in the evaluation of commercial credit applications. The model is concerned with identification and analysis of the purpose and payment, inherent in any loan request. It functions in a real time conversational fashion to produce an extensive amount of information for decision-making purposes. The model is not a decision-model but generates data to aid a loan officer in his decisions and makes use of the conversational capabilities-as well as the speed and power of the computer.

Findings and Conclusions: It was found that such a model could be developed. There are, however, certain limitations in the use of the model in its final form. The model is constrained in its application to analysis of commercial loan requests to finance growth in existing product lines (i.e. new ventures cannot be analyzed). The model does produce outputs to help evaluate the payment (repayment) capability of the firm, but the procedure does not concern itself with the need for collateral or protection. The model mainly produces a number of useful outputs which the loan officer can use to assist his judgment in deciding upon the size of a desired loan and its repayment schedule.