MF-EP (Micro-Financial Evaluation Procedure) is an innovative risk-rating system developed in order to more accurately assess the creditworthiness of small and medium-sized enterprises (SMEs). This software-based credit assessment system has been developed by Imlec, a leader in financial services, to provide a more transparent and efficient analysis of potential SME clients.
MF-EP helps lenders gain a better understanding of the financial health of SMEs through enhanced risk-rating algorithms, designed to take into account the complex nature of the business. The system uses a 5-step procedure to determine the chances of potential financial success, or 'micro-financial health' of the company. The 5-steps consist of two basic information gathering processes and three analysis steps.
The first two steps involve the collection of industry, regional, and legal data, as well as the gathering of financial records and financial statements which will be used to construct a baseline picture of the company's risk profile.
The third step of the process involves the use of advanced analytics, to evaluate the financial health of the company in question. This includes the use of sophisticated algorithms, to analyse and synthesise the data collected in steps one and two. This includes evaluating the financial health and performance of the company, as well as its current and prospective position in the market.
The fourth step involves the calculation of a risk score, which takes into account several variables, such as the company's financial situation, the industry sector of operation and the geographical location. This risk score allows the lender to quickly determine if the SME is an appropriate candidate for loan approval and, ultimately, the provision of financial services.
Finally, the fifth step is an overall evaluation of the company's potential and/or problem areas. By using the results from the four prior steps, the lender will be better equipped to make decisions, anticipate future problems and provide solutions or additional information to potential and current SME clients.