In today’s lending world, approving the right loan requires more than static financial statements. Borrowers’ cash flows can be unpredictable. Their capacity to repay may be impacted by seasonal fluctuations in revenue, customer payment delays, or brief liquidity issues. These inconsistencies are frequently overlooked by traditional credit evaluations that only consider prior financial performance. Lenders who depend only on historical data or periodic reports may approve loans for businesses that are not financially ready, increasing the risk of defaults and impacting portfolio quality. 

The solution lies in proactive affordability assessment. Lenders need a way to understand not just what a borrower has earned in the past, but how their cash flow behaves today. Pulse’s DebtorIQ provides precisely this. By analysing data from a business’s accounts receivable and accounts payable, DebtorIQ gives lenders actionable insights into cash flow trends and repayment capacity. It allows lending decisions to be based on evidence rather than assumptions. 

The Challenges of Traditional Lending Approaches 

Traditional credit assessments focus on past performance. Lenders review balance sheets, Profit & Loss statements, and past repayment history. While these provide context, they often miss real-time affordability issues. Waiting for quarterly reports or manual updates can mean financial stress goes unnoticed until it becomes a problem. 

Loans approved without a forward-looking view increase the risk of defaults. Borrowers may find themselves stretched, and lenders may face higher credit losses. Another challenge is the reliance on incomplete or inconsistent data. Without a single source of truth, lenders may make decisions based on outdated or fragmented information. 

Lenders need a way to understand whether a business can realistically meet repayment obligations over the loan term. 

How DebtorIQ Supports Affordability Assessment 

Pulse’s DebtorIQ is an advanced tool designed to make affordability checks faster and more accurate. DebtorIQ is part of Pulse’s Business Insights, a unified platform that brings together all critical financial metrics in one place. By consolidating data from OA and OB, Business Insights eliminates the inefficiencies of relying on separate tools for accounting, banking, and reporting. Lenders can quickly assess a borrower’s repayment capacity without switching between systems or manually reconciling information. 

With DebtorIQ within Business Insights, lenders gain actionable insights into cash inflows, outflows, and overall financial health. This empowers them to make more informed lending decisions, ensure loans are affordable for borrowers, and reduce the risk of defaults. 

Key features include: 

• Invoice vs Receipts: Displays billed amounts versus payments received. Lenders can see if cash inflows are steady or irregular.
• Debtor Ageing Analysis: Categorises clients based on the days they take to make the payments. This shows how consistently the business receives cash from its own customers.
• Alerts: Highlights overdue payments, top debtors, and potential liquidity risks. This allows lenders to flag borrowers who may struggle to repay.

By combining these insights, lenders can assess affordability accurately. They can determine if a borrower has the capacity to take on new credit or if adjustments are needed. 

Making Lending Decisions Smarter 

DebtorIQ integrates seamlessly into the lender’s decision-making process. It gives credit teams a real-time view of a borrower’s cash inflows and outflows, and more importantly, their repayment trends before any loan even gets approved. This forward-looking view gives lenders a much better idea of how affordable a loan really is – not just based on what’s shown in the past financials.  

For instance, if a borrower’s cash flow is irregular or they are heavily reliant on slow-paying clients, lenders can take proactive steps. They might tweak some loan terms, change up the repayment schedule or even lend them some short-term cash to help them out till things level out a bit. In extreme cases, lenders may decide to hold off giving them credit till their affordability improves. By using DebtorIQ to make decisions like this, lenders can cut down on the risk of people missing payments or defaulting on loans altogether. 

By using DebtorIQ in this way, lenders reduce the risk of missed payments and defaults. They gain confidence that each loan aligns with the borrower’s actual financial capacity. It ensures lending decisions are more accurate and sustainable. 

Benefits Beyond Affordability Checks 

DebtorIQ offers advantages that go far beyond simple affordability assessment. 

Regulatory Compliance: The system maintains real-time, auditable records of a borrower’s financial performance.  This allows lenders to show they’ve put in the effort to really understand a borrower before lending, which is a big help in avoiding trouble with the regulators. Doing things this way helps lenders tick the right boxes and avoid unexpected headaches down the line. 

Operational Efficiency: DebtorIQ automates the collection and analysis of financial data. It saves the day by getting rid of the need for pesky spreadsheets and manual updates, and all the fractured reporting that comes with them. Credit teams can focus on decision-making rather than data management. This speeds up the loan approval process and reduces errors. 

Stronger Borrower Relationships: By approving loans that reflect a borrower’s actual financial capacity, lenders build trust and credibility. Borrowers feel supported and confident that the credit they receive is manageable. This reduces financial stress and fosters long-term partnerships. 

In the end, what DebtorIQ does is turn lending on its head – it used to be all about reacting to a situation, now it’s about being smart, efficient, and really taking the time to know your customers. 

Conclusion 

In modern lending, affordability matters as much as creditworthiness. Pulse’s DebtorIQ helps lenders assess whether borrowers can realistically meet repayment obligations. By using real-time accounts data, lenders make informed decisions and reduce risk. 

DebtorIQ turns raw accounts receivable and payable data into actionable insights. It lets lenders focus on lending responsibly, and that improves the quality of their loan portfolio and deepens their relationships with borrowers. In a tough lending market like this, tools like DebtorIQ are vital if lenders want to stick to a strategy that’s going to pay off in the long run. Contact us to learn more about DebtorIQ.