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How to mitigate risk with APIs and reporting

How to overcome top challenges working capital finance lenders face today: mitigate risk with APIs and reporting based on Solifi’s SaaS technology.

In this five-part blog series, we identify the top four challenges working capital* finance lenders face and how software-as-a-service (SaaS) technology can help you overcome those challenges today and futureproof your business for tomorrow.

*For simplicity, we generally define working capital as invoice finance and asset-based lending (ABL) finance. Invoice finance includes recourse and non-recourse factoring, invoice discounting, and shadow ledgering. Asset-based lending finance includes accounts receivable, inventory, equipment, and term-loan lending. The structure of these working capital finance lending arrangements varies regionally.

Top ways working capital lenders can mitigate risk with APIs and reporting

Earlier in this blog series, we discussed how APIs, data streaming, reporting, and software-as-a-service (SaaS) technology can help you optimize business operations and uncover hidden insights to make better business decisions. That same technology and those hidden insights also help working capital lenders identify, predict, and mitigate risk.

The best way for working capital lenders to mitigate risk is to receive data from multiple sources on a timely basis. It’s all about the combination of bank (lender), client, and external data. For example, a lender reviewing information from various sources may include incoming deposits via a treasury management platform, or comparing incoming cash against the cash applications in the client’s accounting system to ensure the correct invoices were paid, or looking at historical payment trends.

Accessing and interpreting this kind of meaningful data quickly from multiple sources is one of the most common challenges working capital firms face today. First, how do you gain access to those multiple sources of data? And then, how do you cut through that noise to extract meaningful insights quickly to mitigate risk proactively?

That’s where the right technology can help. APIs, data streaming, and reporting connect your systems with other systems and third-party partners to retrieve the necessary data to turn these multiple sources into business insights. Through this technology, you can identify irregularities and flag potential issues to help you make better business decisions and mitigate risk for you and your customers.

See Part 3 and Part 4 in this series to learn more about APIs and data streaming and how this technology manages your business today and futureproofs it for years to come.

How working capital lenders mitigate risk with APIs

Today, a customer’s creditworthiness goes beyond a credit score. That’s because we now have the technology to gather meaningful insights in real-time from a number of resources. API solutions, made possible through SaaS technology, allows different application technologies to share data, connect software programs, and talk to each other in real time. Those APIs create a bridge between multiple platforms and data sets using third-party applications.

Gathering insights from multiple sources, enabled by APIs, provide the information you need to mitigate risk while taking care of your customers. Some of the most valuable ways APIs can help you mitigate risk include: 

  • Automate processes (ineligible calculation, loan application, credit decisioning)
  • Maintain full control of the data supplied and stored (data privacy)
  • Build out sophisticated formulas to analyze critical data (credit analysis / creditworthiness, availability, performance)
  • Integrate data to centralize data sets and processes (data accuracy and efficiency)

Working with timely data from multiple sources sets you up for success so you can approach risk proactively rather than reactively. You want to see what borrowers and clients are doing in the market – not just with you – such as with trade agencies, credit agencies, other systems. All these different sources of data are pieces of a complex puzzle providing a holistic picture of what’s happening with your loan or risk exposure.

How to mitigate risk with data streaming and reporting

Data is coming at us faster than ever before. In fact, 90% of the world’s data was created over the past two years. And that data will grow exponentially as we move toward what’s known as Industry 4.0.

This next phase of the Industry Revolution, Industry 4.0, means you’ll receive huge amounts of data at high speeds in different formats from various sources. And there is tremendous value in that data to help you mitigate risk.

However, that’s a lot of data to extract deeper insights quickly. Where do you even begin to prepare for that explosive growth and find relevant insights to help mitigate risk?

Fortunately, there is an easy solution. SaaS-based technology and an open finance platform offered by Solifi is the perfect model to enable data streaming that can provide the data you need to find patterns and identify potential risk.

Data streaming continuously provides data captured in Solifi ABL and Factoring applications in near real-time. This immediate access to data allows you to assess, report, and react quickly.  

Data streaming and reporting insights help mitigate risk

So once you have the data, then what? How is this data going to help ABL and factoring lenders mitigate risk? While data is important, responding to what the data insights reveal is crucial. Some of the most valuable ways data streaming and reporting insights can help you mitigate risk include:  

  • Derive powerful analytics by integrating and analyzing real-time data to control risk and make appropriate adjustments quickly.
  • Forecast the risk of your accounts receivable portfolio, which makes it easier to monitor risk and mitigate losses due to debtor issues, such as bankruptcy.
  • Proactively identify both portfolio risk and new lending opportunities with trend reports.
  • Monitor, examine, track, and calculate borrowing base versus asset base with credit-monitoring technology using complex algorithms to identify irregularities.

You can obtain these kinds of insights quickly once you have the data providing early warning indications that are crucial to a lender’s day-to-day operations. Real-time reporting can better assess the risk so you can get out in front of that risk to prevent or at least minimize your losses.  

Top 5 reasons why working capital lenders should care about APIs and reporting to mitigate risk

Why should a working capital lender care about APIs and reporting to help mitigate risk? Together, they provide the technology path and insights to help you understand your risk and provide what you need to manage your collateral value. For example, our agile technology helps you anticipate and react to potential risk and provides many benefits, such as:

  1. Connect internal and external disparate systems so they can talk to each other and provide information to create a more accurate and holistic picture and help you make better business decisions to minimize risk.
  2. Leverage risk-management expertise from API technology partners like Equiniti Riskfactor.
  3. Identify and lift data insights identified through APIs and data streaming to help manage risk proactively.
  4. Provide context for any outliers and uncover legitimate reasons why something that appears risky is not a concern.
  5. Prepare for the influx of data coming from Industry 4.0 and the post-pandemic recovery to better manage risk, create a better customer experience, and differentiate from your competition.

APIs and reporting provide real-world solutions for working capital pain points

And here are a few real-world examples of APIs and reporting working together to bring together information from various sources to create insights to mitigate risk that provides value.

  • APIs combine bank, client, and external data (e.g., Dun & Bradstreet) to provide a single view of risk in a specific configuration for day-to-day and portfolio level consumption. This is accomplished through trend analysis, risk scoring, and exception reporting.
    • Solifi’s system, for example, features configurable exception reporting at the client level that covers various ABL-specific functionality.
    • Let’s say sales info has not been updated in X days. That outlier will hit the exception report as a heads-up.
    • However, when you layer in data extraction, you’ll learn that nothing has been submitted. Therefore, you can schedule the data to be delivered without intervention from the borrower.
  • For factors, connecting with APIs gives you access to near real-time data from multiple sources such as credit scoring, forecasting, and reporting for accurate risk assessment of non-recourse exposure. The right agile technology can help you combat uncertainty, risk, and unpredictability in your line of business.
  • On the ABL reporting side, Solifi offers an AR Wizard, which cuts hours from the manual process of reviewing and calculating ineligibles.
    • This software, with the click of a button, takes client AR aging information and breaks it down into a reporting format that can be read and interpreted easily and quickly online in a self-service portal.
    • Mitigates risk and increases accuracy by automating complex formulas used to determine collateral eligibility.

Create a seamless user interface to mitigate risk

These are just a few practical examples of how working capital firms can mitigate risk with APIs and reporting. Learn more about how Solifi’s open finance platform, SaaS-in-the-cloud technology, APIs, reporting, and data streaming connect disparate systems for a seamless user interface to help you mitigate risk and overcome your top working capital finance challenges.

Ultimately, the goal of our platform and technology is to connect all the different systems for a seamless user interface to optimize workflows, make better business decisions, mitigate risk, save money, create better customer experiences, and help you differentiate from the competition.

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