SME Lending
From Open Risk Manual
Definition
SME Lending denotes any of a wide array of loans or related financial products that provide financing to small or medium sized enterprises.
A more granular approach defines not two but three groups: Micro, Small and Medium Enterprises.
SME Definition Criteria
SME's can be distinguished from large corporate entities on the basis of a number of criteria:
- Number of Employees
- Annual Sales / Turnover
- Fixed Assets
- Invested Capital
Business Models
- SME Lending is typically provided by banks. Additional channels may include some form Securitization
- Recent approaches (Digital SME Finance) include Peer-to-peer Lending (Marketplace lending or crowdfounding) and Supply Chain Finance
Dimensions that differentiate SME Lending Business Models:
- The underwriting process (Credit Origination)
- The Credit Portfolio Management approach
- The funding approach
Regulatory Status
- Capital requirements for SME exposures are set separately from corporate or retail exposures (see ASRF)
Accounting Status
SME Credit Risk Models
Similar with other credit assets, SME credit risk models will include
- various types of credit scorecards
- models producing Risk Parameters for internal risk management and regulatory purposes
- a specialized Credit Portfolio Model
