# Looking out for the UK’s overlooked SMEs Author: Pal Sinha, Barnali Author URL: https://financedigest.com/author/pal-sinha-barnali Published: 2017-08-24 Category: BANKING Category URL: https://financedigest.com/category/banking Meta Title: How ThinCats Benefits Overlooked SMEs in UK Meta Description: Learn how ThinCats, led by Credit Analyst VyasAdhikari, provides innovative lending solutions to UK SMEs overlooked by traditional banks. Explore now! URL: https://financedigest.com/looking-out-for-the-uks-overlooked-smeshtml ![undefined](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/1-3-1736843578621-compressed.jpg) _**VyasAdhikari**, Credit Analyst at ThinCats explains how their offerings benefit those often overlooked SMEs._ With stricter banking regulations since 2008, Brexit uncertainty and sparse data available on small-medium enterprises (SMEs [\[1\]](#_ftn1)), mainstream lending sources are not sufficiently servicing the credit appetite of UK businesses. The size of this ‘SME funding gap’ is estimated to increase to £22 billion by 2017 [\[2\]](#_ftn2). This is a major factor in the growth of the alternative finance (alt-fi) industry, with many alternative business funders focusing specifically on SMEs. ![Vyas Adhikari](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/fd240817-1-1736843578674-compressed.jpg) Vyas Adhikari At this nascent stage in the [industry’s development](https://www.financedigest.com/homewares-market-recent-industry-developments-and-growth-strategies-adopted-by-players.html "Homewares Market: Recent Industry Developments and Growth Strategies Adopted by Players"), it is vital for these lenders to develop healthy portfolios, not just for their investors, but to build the reputation of the alt-fi industry as a whole. Peer-to-peer lending accounted for 13.9% of new bank loans to SMEs in 2015 [\[3\]](#_ftn3).  This [leaves plenty of room for further growth; however, without reliable data, it will be a difficult trajectory](https://www.financedigest.com/power-squeeze-curbs-chinese-growth-leaves-europe-in-a-gas-bind.html "Power squeeze curbs Chinese growth, leaves Europe in a gas bind"). Without the resources and name recognition of the leading banks, alt-fi lenders are continuously innovating to gain [market](https://www.financedigest.com/the-next-decade-to-see-the-humanized-liver-mice-model-market-detonate-innovation.html "The Next Decade To See The Humanized Liver Mice Model Market Detonate Innovation") share – there has been an explosion of credit risk modelling innovation in the SME finance market segment. To complement this, Commercial Credit [Data Sharing](https://www.financedigest.com/world-shares-rise-u-s-yield-curve-inverts-after-strong-jobs-data.html "World shares rise, U.S. yield curve inverts after strong jobs data") (CCDS) is expected to kick off later this year; which will require nine major banks to share credit information on all their (willing) SME clients. This influx of new current [account](https://www.financedigest.com/coffee-current-accounts-and-the-commoditisation-conundrum.html "Coffee, current accounts and the commoditisation conundrum") and credit information will help the alt-fi industry to continue serving a host of currently overlooked smaller businesses. It is, of course, the SMEs with good prospects and in [urgent need](https://www.financedigest.com/why-the-us-urgently-needs-media-compliance-auditing.html "Why the US urgently needs media compliance auditing") of finance to whom we most want to provide lending capital. Data scientists can identify and further refine this segment of SMEs, to pinpoint those that are [currently overlooked by the banking industry](https://www.financedigest.com/cottonseed-hulls-market-2022-scope-of-current-and-future-industry-2028.html "Cottonseed hulls Market 2022 | Scope of Current and Future Industry 2028"). ThinCats is [launching its first targeting model](https://www.financedigest.com/mercedes-benz-launches-e-class-its-last-new-combustion-engine-model.html "Mercedes-Benz launches E-Class, its last new combustion engine model"), whose algorithm is aimed at identifying these UK SMEs. By focusing origination efforts on this segment, ThinCats can grow many more mutually beneficial arrangements with SMEs. The algorithm is an ensemble of two models: one that assesses a company’s need for borrowing, the other assessing their risk profile. Combining these ensures origination effort is focused on appropriate companies. The algorithm is trained, using publicly available data, on a UK SME ‘universe’ of borrowing and non-borrowing enterprises. The borrowing model considers a firm’s past behaviour and access to other [funding sources](https://www.financedigest.com/nissan-pushes-partner-renault-to-sell-down-stake-may-raise-funds-source.html "Nissan pushes partner Renault to sell down stake, may raise funds -source") to predict their desire to borrow over the next 12 months. The risk model initially examines [balance sheet](https://www.financedigest.com/ecb-policymakers-back-jumbo-rate-hike-differ-on-balance-sheet-cut.html "ECB policymakers back jumbo rate hike, differ on balance sheet cut") characteristics but, crucially, ThinCats differentiates itself by including proprietary risk metrics that are not used by other lenders. These can enhance the view of [firms undervalued by mainstream banking](https://www.financedigest.com/bank-of-england-publishes-rules-for-energy-firms-liquidity-tool.html "Bank of England publishes rules for energy firms’ liquidity tool"). For example, our [model will highlight the rating of firms that demonstrate adaptability to market](https://www.financedigest.com/the-humanized-mice-model-market-to-grow-on-a-satisfactory-note.html "The Humanized Mice Model Market to grow on a satisfactory note") fluctuations. The intended result is a cohort of healthy SMEs that are poised for [successful growth](https://www.financedigest.com/the-perfect-storm-of-growth-and-success-for-the-restech-market.html "The Perfect Storm of Growth and Success for the ResTech Market"), yet still might not tick the boxes of a banking credit model. This comprehensive modelling approach is part of ThinCats’ effort to provide the UK’s best [SMEs with the finance](https://www.financedigest.com/forecast-based-financing-for-smes.html "Forecast-based financing for SMEs") they need to flourish. Since 2008, [banking finance](https://www.financedigest.com/the-future-of-artificial-intelligence-in-banking-and-finance.html "The future of artificial intelligence in banking and finance") has been difficult to obtain and often slow. ThinCats offers an open door and [faster service](https://www.financedigest.com/why-faster-reactivity-to-end-of-life-deadlines-is-key-for-financial-services.html "Why faster reactivity to end-of-life deadlines is key for financial services") to firms that don’t ‘fit the mould’ of mainstream banking, by thinking laterally and picking up the SME vibrations that no one else is hearing. [\[1\]](#_ftnref1) SMEs are defined by the National Audit Office as businesses with fewer than 250 employees and an annual turnover of less than £50 million [https://www.nao.org.uk/wp-content/uploads/2013/10/10274-001-SMEs-access-to-finance.pdf](https://www.nao.org.uk/wp-content/uploads/2013/10/10274-001-SMEs-access-to-finance.pdf) [\[2\]](#_ftnref2) National Audit Office – Improving access to finance for small and medium-sized enterprises, page 4, 2013 [https://www.nao.org.uk/wp-content/uploads/2013/10/10274-001-SMEs-access-to-finance.pdf](https://www.nao.org.uk/wp-content/uploads/2013/10/10274-001-SMEs-access-to-finance.pdf) [\[3\]](#_ftnref3) University of Cambridge – THE 2015 UK ALTERNATIVE FINANCE INDUSTRY REPORT, page 21, 2016 [https://www.jbs.cam.ac.uk/fileadmin/user\_upload/research/centres/alternative-finance/downloads/2015-uk-alternative-finance-industry-report.pdf](https://www.jbs.cam.ac.uk/fileadmin/user_upload/research/centres/alternative-finance/downloads/2015-uk-alternative-finance-industry-report.pdf) --- This blog is powered by Superblog. 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