How can alternative data support both SMBs and Lenders?

November 19, 2020
financial data support lenders loans

Access to financing continues to be one of the biggest issues for micro, small and medium sized enterprises. Globally, SMBs still have unmet credit needs totaling US$2.1 to US$2.6 trillion.

The credit gap is a result of problems on both the demand and supply side. SMB owners are reluctant to seek out business loans because of numerous documentation, collateral requirements and the length of time taken for a loan to get approved. On the supply side, lenders see SMBs as high risk opportunities due to the lack of data available to assess the financial health of these businesses. Experts believe that alternative data can help in tackling issues on both the demand and supply side. While traditional financial data such as sales, bank accounts and business transactions has its merits, alternative data such as online rankings, social media and mobile data can provide a nuanced view of an SMB’s performance. SMBs can leverage alternative data to build their credit worthiness. Online sales, customer reviews and marketplace ratings like Amazon sales rank are some metrics for SMBs to build their credit profile.

Fintech lenders have been quick to realize the value in these data sets. With the help of advanced analytics, they have managed to address the problem. AI has helped in analysing these diverse data sets even more quickly and accurately in order to make stronger predictions on an SMBs performance.

Due to these advantages, alternative data can bridge the gap between SMBs and lenders and deliver on the unmet needs of the market.

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