SYSTEMS AND METHODS FOR EVALUATING THE ABILITY OF BORROWERS TO REPAY LOANS

• US 20110137788A1
• Filed: 12/04/2009
• Published: 06/09/2011
• Est. Priority Date: 12/04/2009
• Status: Active Grant

• Current Assignee: Robert A. Merkle
• Original Assignee: Robert A. Merkle
• Inventors: Merkle, Robert A.
• Granted Patent: US 8,706,615 B2
• Time in Patent Office: Days
• US Class Current: 705/38
• CPC Class Codes: G06Q 20/28 Pre-payment schemes, e.g. "pay before"
• CPC Class Codes: G06Q 20/4016 involving fraud or risk level assessment in transaction processing
• CPC Class Codes: G06Q 40/02 Banking, e.g. interest calculation or account maintenance credit or loans G06Q40/03
• CPC Class Codes: G06Q 40/03 Credit; Loans; Processing thereof

Abstract

Systems and methods are provided for evaluating the ability of a borrower to repay a potential or existing loan. The systems and methods can use daily cash flows of the borrower obtained from one or more transaction accounts of the borrower. The cash flows can correspond to a period preceding the time of the analysis, and can include the most recent cash flow information in the transaction account. The cash flows can be adjusted to account for seasonal and day to day variations in the cash flows. The adjusted or non-adjusted cash flows can be trended, and projections of the cash flows can be generated based on the trends. The projected cash flows can be evaluated to provide an indication of whether the cash flow of the borrower is and will remain sufficient to facilitate repayment of the loan.

Claims

1. A system for evaluating the ability of a borrower to repay a loan, the system comprising a computing device, wherein the computing device comprises a processor, memory communicatively coupled to the processor, and computer-executable instructions stored on the memory, wherein the computer-executable instructions, when executed on the processor, cause the computing device to:

determine a trend of cash flow for the borrower over a past period of time based on information stored in a financial account of the borrower;

project the cash flow of the borrower over a period of time subsequent to the past period of time based on the trend of cash flow for the borrower over the past period of time; and

classify the borrower as belonging to a predetermined risk group based on the projection of the cash flow and a predetermined criterion.

2. The system of claim 1, wherein the predetermined criterion is a predetermined set of relationships between trends in the projected cash inflow, cash outflow, and net cash flow for the borrower.

3. The system of claim 1, wherein the computer-executable instructions, when executed on the processor, further cause the computing device to analyze information in the financial account and segregate the information into individual cash inflows and outflows associated with individual financial transactions.

4. The system of claim 1, wherein the computer-executable instructions, when executed on the processor, further cause the computing device to determine whether a cash flow of the borrower at a point in time agrees with the trend of cash flow at the point in time to within a second predetermined criterion and, if not, evaluate whether changes in the operating condition of the borrower have occurred.

5. The system of claim 1, wherein the computer-executable instructions, when executed on the processor, further cause the computing device to adjust the trend of cash flow for the borrower over the past period of time to reduce historical seasonal variations in the trend, and project the cash flow of the borrower over the period of time subsequent to the past period of time based on the adjusted trend of cash flow.

6. The system of claim 1, wherein the computer-executable instructions, when executed on the processor, further cause the computing device to adjust the trend of cash flow for the borrower over the past period of time to reduce day to day variations in the trend, and project the cash flow of the borrower over the period of time subsequent to the past period of time based on the adjusted trend of cash flow.

7. The system of claim 1, wherein the computer-executable instructions, when executed on the processor, cause the computing device to determine a trend of cash flow for the borrower over a past period of time based on information stored in the financial account by calculating a curve fit based on the cash flow.

8. The system of claim 1, wherein the computer-executable instructions, when executed on the processor, further cause the computing device to determine whether the cash flow of the borrower based on the most recent information stored in the financial account agrees with the trend of cash flow to within a second predetermined criterion.

9. The system of claim 1, wherein the cash flow of the borrower projected over the period of time subsequent to the past period of time is a net cash flow of the borrower;

and

the computer-executable instructions, when executed on the processor, further cause the computing device to assess one or more of the following with respect to the loan;

a multiple by which the projected net cash flow of the borrower exceeds the financing cost of the loan;

how long the financing cost of the loan can be paid in view of the projected net cash flow;

how long the financing cost of the loan can be paid in view of the projected net cash flow and a cash balance of the borrower;

the ability of the borrower to pay additional financing based on the net cash flow at the period in time and the projected net cash flow; and

the ability of the borrower to pay additional financing based on the net cash flow at the period in time, the projected net cash flow, and the cash balance of the borrower.

10. The system of claim 1, wherein the computer-executable instructions, when executed on the processor, further cause the computing device to identify types of expenses of the borrower and compare the types of expenses to the types of expenses normally present in the industry with which the borrower is associated.

11. A system for evaluating the ability of a borrower to repay a loan, the system comprising a computing device, wherein the computing device comprises a processor, memory communicatively coupled to the processor, and computer-executable instructions stored on the memory, wherein the computer-executable instructions, when executed on the processor, cause the computing device to:

identify customers and/or vendors of the borrower based on information stored in a financial account of the borrower;

classify the customers and/or vendors by industry;

determine key customers and/or vendors with which the borrower has the highest flows of cash in relation to the other customers and/or vendors of the borrower in accordance with a predetermined criterion;

determine trends of cash flows between the borrower and the customers and/or vendors based on the financial information stored in the financial account; and

assess one or more of;

the number of the key customers of the client;

the growth pattern of the cash flow of the borrower from the key customers;

the growth pattern of the industry or industries of the key customers;

the multiple of the net cash flow of the borrower to the sum of the fixed and financing costs of the borrower;

whether the projected cash inflow and outflow are moving commensurately to within a predetermined criterion;

the length of time the current management team of the borrower has been in place; and

the personal risk score of the current management team of the borrower.

12. The system of claim 11, wherein the computer-executable instructions, when executed on the processor, determine trends of cash flow between the borrower and the customers and/or vendors based on the financial information stored in financial account of the borrower by:

determining the trends of cash flow between the borrower and the customers and/or vendors over a past period of time based on the information stored in the financial account of the borrower; and

projecting cash flows between the borrower and the customers and/or vendors over a period of time subsequent to the past period of time based on the trends of cash flow between the borrower and the customers and/or vendors over the past period of time.

13. The system of claim 11, wherein the computer-executable instructions, when executed on the processor, further cause the computing device to identify customers and/or vendors of additional entities having financial accounts at the financial institution at which the financial account of the borrower is held.

14. The system of claim 13, wherein the computer-executable instructions, when executed on the processor, further cause the computing device to identify interrelationships among the customers and/or vendors of the additional entities and the customers and/or vendors of the borrower.

15. The system of claim 13, wherein the computer-executable instructions, when executed on the processor, further cause the computing device to:

classify the additional entities by industry and determine a concentration of the additional entities in particular industries;

classify the additional entities by trade group and determine a concentration of the additional entities in particular trade groups; and

/or

determine the number of customers of the additional entities.

16. The system of claim 11, wherein the computer-executable instructions, when executed on the processor, cause the computing device to identify customers and/or vendors of the borrower based on information stored in the financial account by:

identifying the customers based on inflows of cash to the financial account from the customers; and

identifying the vendors based on outflows of cash from the financial account to the vendors.

17. The system of claim 11, wherein the computer-executable instructions, when executed on the processor, further cause the computing device to adjust the trends of cash flow between the borrower and the customers and/or vendors over the past period of time to reduce historical seasonal variations in the trends, and project the cash flows between the borrower and the customers and/or vendors over the period of time subsequent to the past period of time based on the seasonally adjusted trends of cash flow.

18. The system of claim 11, wherein the computer-executable instructions, when executed on the processor, further cause the computing device to adjust the trends of cash flow between the borrower and the customers and/or vendors over the past period of time to reduce day to day variations in the trends and project the cash flows between the borrower and the customers and/or vendors over the period of time subsequent to the past period of time based on the smoothed trends of cash flow.

19. The system of claim 11, wherein the predetermined criterion is:

the customers having the highest cash flows into the financial account and who, in the aggregate, provide approximately eighty percent of the total cash flow into the financial account; and

the vendors receiving the highest cash flows from the financial account and who, in the aggregate, receive approximately eighty percent of the total cash flow from the financial account.

20. The system of claim 11, wherein the computer-executable instructions, when executed on the processor, further cause the computing device to determine a Standard Industry Code and/or NAICS code of each of the vendors, assign an expense category to cash outflows from the financial account to the vendors based on the Standard Industry Code and/or NAICS code, and classify each of the cash outflows as a fixed or variable expense.

21. The system of claim 11, wherein the computer-executable instructions, when executed on the processor, further cause the computing device to assess the health of the relationships between the borrower and the customers and/or vendors based on predetermined relationships between the cash flows of the borrower and the customers and/or vendors.

22. A system for evaluating a loan portfolio of a financial institution, the system comprising a computing device, wherein the computing device comprises a processor, memory communicatively coupled to the processor, and computer-executable instructions stored on the memory, wherein the computer-executable instructions, when executed on the processor, cause the computing device to:

determine the trend of cash flow for each borrower in the loan portfolio over a past period of time based on information stored in financial accounts of the financial institution;

project the cash flows for each borrower over a period of time subsequent to the past period of time based on the pattern of cash flow for the borrower over the past period of time; and

classify each borrower as belonging to a predetermined risk group based on the projection of the cash flow for the borrower and a predetermined criterion.

23. The system of claim 22, wherein the computer-executable instructions, when executed on the processor, further cause the computing device to determine how many future loan payments can be made by each borrower based on the projected cash flow of the borrower and a current cash balance of the borrower in the financial institution.

24. The system of claim 22, wherein the computer-executable instructions, when executed on the processor, further cause the computing device to determine the market value of the loan portfolio based on the number of future loan payments that can be made by each borrower using portfolio valuation techniques that calculate the current value of a series of future cash flows.