Have you ever felt like a credit score doesn’t capture the full picture of a borrower’s financial health? What if the traditional credit score you rely on misleads you to a risky borrower? In today’s fast-paced financial world, you – as a lender, need more than a score to assess creditworthiness. You need a 360-degree view of a business’s actual performance. That’s where GST data comes into play.
While credit scores have long been used to evaluate loan applicants, they often miss real-time insights into business operations. GST data, however, gives you a clearer window into how a business is truly functioning. It offers government-backed, real-time financial signals that help you assess credit risk with far greater accuracy.
Want to see it in action? Explore Pro Analyser’s GST Analyser Tool and start making lending decisions based on facts, not assumptions.
In this article, we’ll explore why GST data is transforming how you evaluate creditworthiness and how it gives you a clear picture of borrower’s repayment potential and financial stability.
The Traditional Credit Score: Limited and Outdated
Credit scores serve a purpose, but they come with limitations:
- They reflect historical borrowing, not the present financial behavior of a borrower.
- They can be artificially boosted through clever but superficial financial management.
- They ignore operational behavior, like tax compliance and filing regularity.
As a result, you might end up approving a risky borrower or missing out on a potential lending opportunity. That’s a risk you shouldn’t have to take.
GST Data: A More Transparent Credit Indicator
Thanks to India’s GST regime, you now have access to authentic, verifiable, and up-to-date tax data. It’s a reliable way to assess borrowers’ creditworthiness based on actual performance not just legacy scores.
1. Real-Time Revenue Tracking
GST filings offer direct visibility into a borrower’s income through real-time reporting of sales and purchases. With this, you can accurately assess liquidity, revenue stability, and operational consistency.
2. Tamper-Proof Financial Data
GST returns are verified by government systems, reducing the risk of fraud or data manipulation. Unlike unaudited financial statements, these filings give you a concrete view of the borrower’s actual operations.
3. Compliance as a Character Signal
Regular GST return submissions signal that a borrower is financially responsible and compliant. If a business is punctual with taxes, there’s a strong chance they’ll honor loan repayments too.
4. Cash Flow Visibility
GST data also reveals whether a business has adequate cash flow. For instance, consistently higher output tax over input tax shows strong income generation. This can be a solid green flag for loan approval.
Businesses with strong, regular GST filings typically reflect financial soundness – making them lower-risk lending profiles. Pro Analyser seamlessly integrates GSTR-1, GSTR-3B, and GSTR-2B giving you actionable insights in minutes. Try it now.
Want more depth on liquidity? Pair this with our bank statement analysis software for sharper risk insights.
How You Can Use GST Data to Strengthen Lending
1. Review Revenue Trends
Track GST filings over time. Consistent or growing payments suggest a thriving borrower. Inconsistent or declining numbers may be a warning sign.
2. Examine Compliance Patterns
Check for timely return filing. Late or missed filings could reflect poor financial discipline—a potential red flag for repayment reliability.
3. Cross-Verify with Financials
Compare GST data against the borrower’s submitted financial statements. Large mismatches might suggest underreporting or financial mismanagement.
4. Detect Tax Evasion or Invoice Irregularities
GST data helps spot fake invoices and other discrepancies. You can use input/output tax ratios to flag potentially fraudulent activity.
Why Should You Rethink Risk Assessment?
As the lending ecosystem becomes more digitized, relying only on credit scores for assessing borrower creditworthiness limits your view. GST data allows you to make more informed, confident lending decisions based on transparent, real-time data. For borrowers, this is a wake-up call to stay compliant. But for you, the lender, it’s an opportunity to reduce risk and build a healthier loan book.
Thinking of funding a borrower? Here’s how you can put GST data to work: