1. Underwriting for Small Business and Consumer Digital Lending
RCGiltner Services, Inc.
2016

2. 1. Comprehensive Management Overview
Introduction
The development of online technology and integration allows the sound underwriting of small loans for consumers and small businesses in minutes.
This document presents our underwriting approach in the follow sections:
1. Comprehensive Management Overview
2. Business Underwriting with Business MinuteLender
3. Consumer MinuteLender Loan Underwriting
4. Consumer Underwriting with PaySound

3. 1. Comprehensive Management Overview
Our automated, digital underwriting process provides detailed analysis and documentation to update loan polices, model governance and other bank and Board documents for regulatory support in making and monitoring loans:
Underwriting analysis documentation, model governance and guidelines.
Integrates traditional bank underwriting with automation.
Standard loan agreement design for customization.
Full control of underwriting by the financial institution.
Risk rating and automated monitoring of loans and performance compared to models.
Regulatory documentation for Uniform Retail Classification Account Management, ALLL and risk management.
Model governance and documentation of current loan type performance supporting projected performance.

4. 2. Business Underwriting with BusinessMinute Lender
Small business loans up to $50k with personal guarantees can be underwritten as unsecured, “consumer” credit using traditional bank “debt capacity” and “coverage ratio” analysis.
Sources: “A Guided for Specialized Credit Activities”, FRB Atlanta, 2014, “Risk Management Examination Manual for Credit Card Activities,” FDIC.
Historical Underwriting Automated

5. 2. Business Underwriting with BusinessMinute Lender
Auto-approving small business loans up to $100k with credit score scores and deposit criteria is well established with banks using “paper” processes. We “digitize” all processes.
Regional Bank Auto Underwriting
Regional FI Auto Approve Small Business Loan Up to $100k
Less than $250k total credit with us.
Max. Loan = 2x Avg Monthly Dep. for 6 Mo.
Credit Score 680+
2 Yrs No 60+ Day Late Payments
In-market; not restricted industry.

6. 2. Business Underwriting
We provide full underwriting model documentation for model scope, model governance, control and validation. We use proven credit reporting enhanced by checking deposit information to achieve a 3.8% loss ratio.
The initial underwriting is driven by the guarantor credit score and payment history.
4.1% 20 Year Average
90 day delinquency

7. 2. Business Underwriting
The historical credit card loss rates and the probability of default are listed below. These are derived from the FDIC loss data as well as from Clarity Services, Inc. which compiles information from all three credit bureaus.
Credit Card Loss Rates
Probability of Default

8. 2. Business Underwriting
Business cash available for repayment is derived from the monthly deposits flowing into the business primary checking. Estimates of profit margin is derived from a combined industry analysis from Robert Morris Associates.

9. 2. Business Underwriting
The compilation is presented in a credit matrix which is used for the underwriting of the commercial loans.

10. 2. Business Underwriting Projections
Business program assumptions for the projections based on the asset size and number of commercial deposit accounts.
Average loan $18,000
Average document preparation and closing fee $199
Average interest rate 11%
Loss rate 3.81%
Average late fee per customer $50
Line utilization rate is 80%. (This is reported from our clients using the consumer and commercial digital lending platform. The banks compile this information from their core systems.)
Average profit contribution after losses per loan: $1,097

11. 2. Business Underwriting with BusinessMinute Lender
Underwriting adds your checking deposit relationship. 70% of your business checking accounts can be reached with specific constraints:
Checking account open one year.
Established business with at least one year of operations.
Cash flow data to analyze ability to repay.
Establish payment history with times 30 and times 60 days late with current loan history. Documents willingness and ability to repay.
Signer on checking account willing to be guarantor.
Loan has single guarantor.
Limited other borrowing relationships with the bank. Global credit relationship below $200,000. $50,000 for Pass 3 credits.
The unsecured portfolio will be less than 1% of total loans outstanding.

12. 2. Business Underwriting with BusinessMinute Lender
Dynamic Loan Grading on an individual loan basis uses a is a 7 point grading scale. (Customized to your grading scale)
Pass 1
Pass 2
Pass 3
Management Watch
Special Mention
Substandard
Doubtful/Loss

13. 2. Business Underwriting with BusinessMinute Lender
Automated systems automatically grade and monitor credit grade quarterly looking at cash flow and pulled credit information.
Automated Credit Grading and Monitoring

14. 2. Business Underwriting with BusinessMinute Lender
Credit Risk Management Dynamic Monitoring of Portfolio Dynamic Risk Rating Changes based on cash flow and quarterly soft pull of credit score

15. 2. Business Underwriting with BusinessMinute Lender
Customer 1:
Barber/Beauty
Shop
Customer 2:
Building
Products
Customer 3:
Dr. Office

16. 2. Business Underwriting with BusinessMinute Lender
All Compliance is automated and controlled in the system and is provided for uploading into cold storage.
A. “Know your customer” identification.
E-sign process.
Deposit authorization and features.
Deposit disclosures and tax status.
Loan authorization.
Loan agreements.
Loan guaranty.
Loan features
Signed agreements and authorizations.

17. 3. Consumer MinuteLender Underwriting
Our consumer underwriting standard matrix leverages cash flow information with credit score, credit report and deposit information.

18. 4. Consumer Underwriting with PaySound
Our consumer underwriting standard matrix can also do small compliant loans under $1,000 without a credit score, providing loan amounts similar to overdraft limits on your system, and cannibalize no existing overdraft revenue through “return-all” product design and underwriting.
Statement balances help document funds availability ability to repay
Our models decline 36% of requests.

19. Conclusion
The development of online technology and integration allows the sound underwriting of unsecured small loans for consumers and small businesses in minutes.
This document presented our underwriting approach in the follow sections:
1. Comprehensive Management Overview
2. Business Underwriting with Business MinuteLender
3. Consumer MinuteLender Loan Underwriting
4. Consumer Underwriting with PaySound
For more information, please see our manual document Digital Lending Underwriting, Model Governance Control and Validation.