THE BUSINESS APPLICATION
Where and how to use it
Use it before changing origination volumes, product mix, tenure or funding strategy. Compare a base plan with slower collections, higher losses or tighter funding to identify when liquidity or capital constraints emerge.
A growth plan looks profitable over its full horizon but requires cash before enough repayments arrive. A period-by-period projection surfaces that funding gap and allows the team to compare a slower origination path.
From evidence to a decision
- 01Opening balance sheetBook · cash · funding · capital
- 02New and existing cohortsOrigination and repayment paths
- 03Scenario conditionsLosses · rates · funding
- 04Period-by-period positionLiquidity, earnings and capital
DATA REQUIREMENTS
What records does it need?
These are the records your team would bring together for this analysis. The exact fields and history needed depend on your lending products, the question you want to answer and the period you want to assess.
| Record category | What it contains | Why the detail matters |
|---|---|---|
| Opening position | Loan book, cash, funding, capital and relevant balance-sheet items. | Reconciled at the starting date. |
| Growth and runoff | Origination volumes, product mix, pricing, schedules, prepayment and loss assumptions. | Separate existing-book runoff from new cohorts. |
| Funding and constraints | Maturities, funding rates, available facilities and explicit limits. | Document scenario availability and timing. |
Past loan outcomes help assess how well an estimate reflects your borrowers. For a new decision, use only the information available at that time; later repayments help you review the result afterwards.
Understand data readiness →WHAT YOU RECEIVE
The output
Time paths for liquidity, earnings, loan balances and capital, with the periods and assumptions driving constraints.
WHAT TO WATCH
The limitations
A scenario is conditional, not a forecast promise. Funding availability and management actions must be explicit rather than assumed to appear when needed.
FOR RISK & ANALYTICAL SPECIALISTSHow the analysis works+
The modelling approach
Cohort cash-flow and balance-sheet projections reconcile opening stocks, new business, receipts, repayments, losses and closing stocks. Provisions remain consistent with the scenario rather than being reduced to make growth affordable.
What your risk team should review
Stock-flow reconciliation, funding timing, cohort consistency and sensitivity to correlated downside assumptions.
The right approach depends on your portfolio and available history. Review the fit to your borrowers, the reliability of the estimates and the effect of missing information before using the result in a lending decision.