Author Topic: New white paper finally published about the SMB Lending ecosystem  (Read 3554 times)

fintechjunkie

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FYI – Paper has been published
 
http://wp.me/p60NAx-1b
 
Have fun!
 
fintechjunkie

rawraw

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Re: New white paper finally published about the SMB Lending ecosystem
« Reply #1 on: October 28, 2015, 07:47:57 PM »
I'm scared to click that link outside a sandbox

Fred93

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Re: New white paper finally published about the SMB Lending ecosystem
« Reply #2 on: October 28, 2015, 08:11:17 PM »
Who is the intended audience?

lascott

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Fred

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Re: New white paper finally published about the SMB Lending ecosystem
« Reply #4 on: October 28, 2015, 11:05:00 PM »
FYI Paper has been published
fintechjunkie

Did you know about a 2014 study by the Fed on this specific issue?
http://www.federalreserve.gov/pubs/feds/2014/201410/201410pap.pdf

I was actually corresponding with all the authors (Traci, et al) on a few points on the last few pages of paper.

Like the Fed, I've held a not-so-rosy view on small business loans in P2P (LC specifically).

Fred93

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Re: New white paper finally published about the SMB Lending ecosystem
« Reply #5 on: October 29, 2015, 12:57:38 AM »
Neither paper contains any meaningful conclusion about anything.

Waste of good ink.

Fred

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Re: New white paper finally published about the SMB Lending ecosystem
« Reply #6 on: October 30, 2015, 01:18:59 AM »
Neither paper contains any meaningful conclusion about anything.

Waste of good ink.

Ha ha ...

I found the following to be meaningful:

Quote
Logistic regression results that look at loan performance indicate that loans for small businesses were
much more likely to be delinquent or charged off.

Quote
...  loans for small businesses were more than 250 times more likely to perform poorly than loans for other purposes, which may give some insights into why such loans are charged a higher rate.

This paper really drove me to put a small "manual" drag (i.e., not based on backtesting) in my algo on LC small business loans.

YMMV.

Fred93

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Re: New white paper finally published about the SMB Lending ecosystem
« Reply #7 on: October 30, 2015, 02:34:54 AM »
Ha ha ...

I found the following to be meaningful:
Quote
Logistic regression results that look at loan performance indicate that loans for small businesses were much more likely to be delinquent or charged off.

Its an example of the sort of thing that most serious investors have known for a long time.  Don't need logistic regression to figure it out.  Just look at the performance of loans in the various purpose categories, and small business always comes out bad.  You can mitigate this somewhat with other selection parameters, but why bother... its a robust result. 

I've seen so many academic papers using logistic regression.  I don't begin with the same beliefs as these people.  I don't think logistic regression is the right tool.  As an investor, I'm interested in my returns (after chargeoffs).  Therefore I use tools that estimate my return under various selection criteria.  This is a more sophisticated approach.  Not only more sophisticated, but available to everyone for free!  ( For example anyone can use nsrplatform.com backtesting for free. )

I wrote my own software, because I could never be sure exactly what NSR was calculating, and I probably would have disagreed with something if I did know.  Although I calculate slightly different numerical results my s/w gets (surprise) the same answer: Leaving out the small business loans improves my returns.

So it is nice that they figured out something which is true, but I didn't find it new.

Fred

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Re: New white paper finally published about the SMB Lending ecosystem
« Reply #8 on: October 30, 2015, 04:59:47 AM »
Its an example of the sort of thing that most serious investors have known for a long time. 

Don't think so.
A few lenders/investors in this Forum, including Renton and fintechjunkie / oliver wyman, argued otherwise.

I was just trying to provide a counter argument.