The Future of SMB Credit Data


Is small business risky business? Without comprehensive credit data to demonstrate whether small and medium businesses (SMBs) are reliable, some companies hesitate to engage their services or lend them money. That hesitation is a downside in the current business-friendly climate, which allows for anyone to start a company with a little more than a website and a dream. 
In fact, according to the U.S. Small Business Administration, the U.S. alone is home to 30.2 million small businesses. So then how can potential business customers determine whether a B2B vendor or supplier is trustworthy and financially sound? The answer lies in a combination of innovative technology, artificial intelligence (AI) and user-friendly interfaces to increase access to data about SMB business credit. 

Major credit bureaus aren’t cutting it

By and large, American business is small business. An incredible 98.2% of American employer firms have fewer than 100 workers and 89% have fewer than 20 workers, according to the Small Business and Entrepreneurship Council

With SMBs making up such a large portion of our economy, it is both frustrating and surprising that learning about small business financial activity through business credit bureaus is nearly impossible. 

There are a number of barriers that prevent the major credit bureaus from providing information. The first is that unlike with large companies, the financial activity of SMBs isn’t automatically reported to credit bureaus. Additionally, many SMBs make the majority of their purchases with company credit cards from financial institutions that don’t share positive data with business credit bureaus. Lastly, a lot of small business financial activity is tied to the personal credit of the business owner, not the business itself. 

Combined, these barriers mean that would-be partners often don’t have enough information to confidently embrace even the most dependable SMBs. 

Time to tap into credit unions and community banks

Thanks to AI and machine learning (ML), collecting credit information from a wide range of nontraditional sources — like credit unions and community banks — is now easier than ever. Leaving out these transactions is indefensible. After all, when small businesses don’t have searchable credit information available, that doesn’t mean that they don’t have good credit.

To rectify concerns, the future of SMB credit data must take all credit history into consideration, and populate the information into one comprehensive database that keeps research accurate and simple. 

When companies can do a better job predicting risk, they can make better business decisions. 

SMBs need the tools to tell their own story 

The people who are hurt the most by the gaps in our current system are the SMB owners that regularly miss out on business opportunities. It makes sense, then, to put some of the power as well as some of the responsibility for correcting the system into their hands. 

Any credit database, therefore, needs to do more than just pull all publicly available information. It also needs to give business owners the opportunity to add to that information through an easily accessible, optimized application programming interface (API). 

To begin, business should be able to update and add information about their own financial situation. They should also be able to add in details that could help potential partners learn more about their trustworthiness, such as trade reference, directly into the database. 

In order to maintain a high level of accuracy, the database should notify businesses about any changes to their reports, so that they can monitor their online reputation. While artificial intelligence is a great way to quickly populate a database with large amounts of information, it’s critical to make sure that the information is accurate and complete. All businesses, therefore, should be given the chance to dispute negative information. 

Connecting personal and professional credit history

Business owners should also be able to signal their credibility by linking their own personal credit history to their company’s credit history; the two are invariably related. An effective user interface would allow anyone looking at SMB credit to quickly and easily view information about a principal’s credit history without having to leave that interface. 

Adding this information could be the game-changer that small businesses need to convince partners and lenders that working with a particular small business is less of a risk than they may have thought.

Smaller businesses are the key to a bigger economy

Without adequate information, our economy won’t function at optimal levels. Potential deals will be left on the table, and there’s nothing more frustrating than for a small business owner to feel like they missed out on an opportunity because of circumstances that are beyond their control. 

Luckily, these problems can be prevented with better databases fueled by cutting edge technology. That’s good news for businesses across the board. Increasing access to complete information doesn’t just help individual businesses; it helps our entire economy. 

By Matthew Debbage, COO of CreditSafe and Bill Weiss, VP of Business Development at HighRadius

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