Creating a flexible business credit rating model using multicriteria decision analysis

Abstract

To decide for the approval or rejection of a business loan application, banks are following a rating procedure. However, in many cases this procedure is not simply and properly structured. This may lead to unpleasant results so, for a long time, banks are struggling to find quite flexible and simple rating methods, widely applicable, easily comprehensible, and modifiable from their analysts. This study presents an empirical model of mass business rating with the use of multicriteria analysis (AHP method) and other techniques. Two main scenarios of a two-stage evaluation procedure will be analysed that demonstrate its flexibility, stability, and simplicity. The performance of this method is measured for both presented scenarios showing its capability. Furthermore, this method saves time and sources while ensuring the quality of the produced results. The outcome will be a list of rated businesses which, depending on the score they succeed in each of the two scenarios, will be approved or rejected for a business loan.