Rating Models and Validation - Oesterreichische Nationalbank

— Market prospects are not assessed due to the smaller scale of business activities.
Aside from these simplifications, the procedure applied is analogous to the
one used for business owners and independent professionals who do not prepare
balance sheets.
Start-Ups
In practice, separate rating models are not often developed for start-ups. Instead,
they adapt the existing models used for corporate customers. These adaptations
might involve the inclusion of a qualitative Òstart-up criterionÓ which adds a
(usually heuristically defined) negative input to the rating model. It is also possible
to include other soft facts or to limit the maximum rating class attained in
this segment.
If a separate rating model is developed for the start-up segment, it is necessary
to distinguish between the pre-launch and post-launch stages, as different
information will be available during these two phases.
Pre-Launch Stage
As quantitative data on start-ups (e.g. balance sheet and profit and loss accounts)
are not yet available in the pre-launch stage, it is necessary to rely on other —
mainly qualitative — data categories.
The decisive factors in the future success of a start-up are the business idea
and its realization in a business plan. Accordingly, assessment in this context
focuses on the business ideaÕs prospects of success and the feasibility of the business
plan. This also involves a qualitative assessment of market opportunities as
well as a review of the prospects of the industry in which the start-up founder
plans to operate. Practical experience has shown that a start-upÕs prospects of
success are heavily dependent on the personal characteristics of the business
owner. In order to obtain a complete picture of the business ownerÕs personal
characteristics, credit reporting information (e.g. from the consumer loans register)
should also be retrieved.
On the quantitative level, the financing structure of the start-up project
should be evaluated. This includes an analysis of the equity contributed, potential
grant funding and the resulting residual financing needs. In addition, an analysis
of the organizationÕs debt service capacity should be performed in order to
assess whether the start-up will be able to meet future payment obligations on
the basis of expected income and expenses.
Post-Launch Stage
As more data on the newly established enterprise are available in the post-launch
stage, credit assessments should also include this information.
In addition to the data requirements described for the pre-launch stage, it is
necessary to analyze the following data categories:
— Annual financial statements or income and expense accounts (as available)
— Bank account activity data
— Liquidity and revenue development
— Future planning and company development
Rating Models and Validation
Guidelines on Credit Risk Management 21