The Financing of Innovative SMEs: a multicriteria credit rating model

TL;DR

This paper introduces a novel multicriteria credit rating model for innovative SMEs using ELECTRE-TRI and SMAA-TRI, addressing the challenge of assessing credit risk with qualitative soft information.

Contribution

It presents the first multicriteria credit risk model based on soft information for innovative SMEs, combining ELECTRE-TRI with SMAA-TRI for robust risk classification.

Findings

Effective classification of SMEs into risk categories.

Robustness of the model demonstrated through Monte Carlo simulations.

Application to real case studies validates the approach.

Abstract

Small Medium-sized Enterprises (SMEs) face many obstacles when they try to access credit market. These obstacles are increased if the SMEs are innovative. In this case, financial data are insufficient or even not reliable. Thus, when building a judgemental rating model, mainly based on qualitative criteria (soft information), it is very important to finance SMEs' activities. Until now, there isn't a multicriteria credit risk model based on soft information for innovative SMEs. In this paper, we try to fill this gap by presenting a multicriteria credit risk model, specifically, ELECTRE-TRI. To obtain robust SMEs' assignments to the risk classes, a SMAA-TRI analysis is also implemented. In fact, SMAA-TRI incorporates ELECTRE-TRI by considering different sets of preference parameters with Monte Carlo simulations. Finally, we carry out some real case studies, with the aim of illustrating the multicriteria credit risk model proposed.