Approving a loan is just the beginning of a lender’s relationship with a borrower. While credit scores and financial statements provide a snapshot of a borrower’s past financial behaviour, they may not necessarily guarantee how a project will unfold after funds are disbursed. What happens after the loan is disbursed? Is the borrower using funds as intended? Is the project progressing on schedule? Without these answers, lenders often find themselves operating in the dark, increasing their exposure to loan defaults and non-performing assets.
Many lenders face challenges when borrowers experience financial difficulties mid-project, that end up spiralling into repayment issues. Lenders, that are equipped with insights into borrower projects can detect early warning signs and intervene when necessary to mitigate risk.
The current risks of lending with limited project insights
Consider this scenario: A lender approves a loan for a mid-sized construction project. The borrower presents a solid business plan and strong financial history, but within six months, the project is stalled due to poor budgeting and unexpected regulatory hurdles. Without project visibility, the lender remains unaware of the crisis until the borrower starts missing repayments. By then, the damage is done. This is the reality for many lenders who have limited visibility into borrower projects and they often end up facing common risks like:
- Misuse of funds: Borrowers divert loan money to other business activities instead of the approved project.
- Project delays: Unforeseen challenges such as material shortages or operational inefficiencies lead to disruption of progress.
- High default rates: With limited project visibility, lenders may only discover financial trouble when it’s too late to intervene.
How project visibility can strengthen lending decisions
A Lender that integrates project visibility into their risk assessment processes can gain a significant advantage. Instead of reacting to loan defaults, they are able to review borrower progress and intervene when necessary. Through One Data’s centralized platform, lenders can:
- Review project milestones: Get insight into whether borrowers are meeting key performance indicators.
- Improved loan structuring: By understanding borrower cash flow and project timelines, lenders can create more flexible repayment plans.
- Detect early risk signals: Identify potential repayment challenges before they escalate.
For lenders, project financing doesn’t end once a loan is approved; it requires ongoing visibility and risk mitigation. With One Data, lenders can review borrower projects and gain critical insights to strengthen lending decisions and mitigate risk.
Join One Data today and improve your risk assessment with project data and insights.
