Glossary of Terms

Customer Lifetime Value Calculation

Definition

Customer Lifetime Value (CLV) Calculation is the process of estimating the total revenue a borrower will generate for a lender over the course of their relationship. CLV helps financial institutions assess borrower profitability, prioritize engagement efforts, and optimize lending strategies.

Why is it important to SBA Lending

In small business lending, not all borrowers have the same long-term value. Some businesses may need only a single loan, while others will return for multiple financial products. CLV helps lenders:
-Identify high-value borrowers who are likely to generate recurring business.
-Optimize marketing and retention efforts by focusing on the most profitable customer segments.
-Improve risk-adjusted lending decisions by balancing short-term loan profitability with long-term borrower potential.

Traditional lending models often overlook CLV, leading to missed opportunities in borrower retention and relationship expansion. By incorporating CLV into decision-making, lenders can strategically allocate resources and enhance overall profitability.

What role does Parlay Play

Parlay’s AI-powered Loan Intelligence System (LIS) enhances CLV calculation by:
-Using predictive analytics to estimate borrower potential based on industry trends, financial behavior, and product usage.
-Segmenting borrowers into high-, medium-, and low-value tiers for more effective engagement.
-Optimizing retention strategies by identifying at-risk borrowers and recommending proactive outreach.

With data-driven CLV insights, lenders can maximize loan portfolio profitability, improve borrower relationships, and drive long-term revenue growth with precision.