Full Limit Recommendation Explanation

The reason for the Limit recommendation is that the maximum Limit gets multiplied by the Limit Adjustments percentage of 70%, which derives from Risk scores that our Analytical model calculates based on complex features. 

The maximum limit is calculated by multiplying the estimated turnover (calculated and retrieved from our analytical models) by the turnover percentage, the higher the turnover percentage the more aggressive the risk appetite and max limit, and the less the turnover percentage the more conservative the risk appetite and max limit will be.

 

In this case, based on the financials for 2024, the Turnover of the business is R7,1 million, to get the maximum limit we multiply this by 1,5%, and get R110000 (rounded to the nearest whole number), then we take this maximum limit and multiply it by 70% which gives us R77,000.00, because of the risk adjustment framework assigning a specific percentage when combining a payment risk and default risk score retrieved from the analytical model.

 

I have highlighted al aspects in determining a limit recommendation in the calculation below from the workflow:

I have also had a look at the provided bank statements, and when taking those into account, the Limit Recommendation would be far lower, because the estimated turnover based on the bank statements is ~R500,000.