Addressing the problem of small businesses by developing an international credit scoring model

AAI Labs, an applied artificial intelligence company, is launching Eurostars - an international project that will develop a tool to help small businesses access credit finance. In collaboration with Flexidea, a financial technology company from Poland and the region's leading software development provider from Romania, the researchers plan to revolutionize the old credit scoring models.

"This artificial intelligence solution will help new, low-resource businesses grow and ensure that the small business sector thrives and becomes more easily established in the market," says Prof. Dr. Aistis Raudys, CEO of AAI Labs.

"We see that both Flexidea and other similar credit institutions are constantly challenged to assess the creditworthiness of the smallest businesses that do not have sufficient debt history and collateral. To ensure a secure investment, credit institutions have to carry out additional analyses to anticipate unknown information, which is resource-intensive, leaving small businesses without any secure sources of finance," shares Sergii Demchuk from Flexidea.

Small and medium-sized enterprises make up the vast majority of all European businesses. According to the European Commission, this type of enterprise created more than 83 million jobs in the EU last year and accounted for around 52% of all value-added. The smallest (micro) enterprises are businesses with one or two employees - family-run shops, bakeries, and hairdressers - used by consumers daily. They account for almost a third of all companies in the EU, and in countries such as Poland, they account for around 50% of all businesses.

The research planned under the project will help develop a two-stage artificial intelligence model for factoring businesses. The first step will involve the collection and standardization of data from companies in the region, leading to the derivation of common indicators. Using the standardized data, spreadsheets will be developed to allow factoring companies to assess and predict critical indicators such as the probability of default, loss in case of default, and creditworthiness level.

"Each country has different procedures for collecting data on legal entities, so until now, we have not had a single model that would allow us to assess a business located in another country reliably. Applying machine learning techniques will allow us to standardize data from different countries successfully. Starting with Lithuania, Poland, and Romania, we will be able to bring our solution to small businesses in other countries looking for affordable and convenient sources of finance." - says Prof. Dr. Aistis Raudys, CEO of AAI Labs.

Eurostars is the most extensive international funding program for small and medium-sized enterprises wishing to collaborate on research and experimental development projects that develop innovative products, processes, or services.