What it means to be a ‘credit invisible’ as a small business
By | August 8th, 2017 | Data Sharing


Small businesses play a crucial role in driving the U.S. economy. According to the Small Business Administration, there are approximately 28 million small businesses in the U.S., this number having grown 49 percent since 1982. These businesses depend on lending and communication services to fuel their growth.

Unfortunately, the traditional credit reporting industry makes it difficult for lenders and telecom companies to underwrite and approve small business loans and services. This is because of a lack of consistent business account and payment information with which to make small business risk decisions. As a result, either the financing or services must essentially be guaranteed based on the personal credit history of the owner or they are not available at all to a new small business. This is especially the case for businesses with fewer than ten employees, which make up 90 percent of U.S. small businesses and comprise the fastest growing segment.

This lack of access to credit and communication services hurts lenders and communications companies as well as small businesses. Imagine trying to start and grow a business without being able to secure phone and Internet service, a credit card and other necessary services because your new business does not have an established credit history by traditional standards. Lenders and communication companies want to be able to safely, confidently underwrite and approve new credit and services. One solution to this problem is for communications and financial services companies, as well as marketplace lenders and other service providers, to share small business data on applicants as well as account performance.

In addition to applicant and account data, advanced machine learning technology can be applied to Web data and geographic data to help qualify or disqualify small businesses. For example, the presence of a business name and address on a popular online business network can help verify the business. Using publicly available Web data to confirm the type of business can also assist in determining the risk associated with a particular small business.

At XOR, we have found that creating a cross-industry small business data exchange helps financial services and communications companies better evaluate credit and fraud risk, and serve even the smallest businesses. As a result, we created the Small Business Risk Exchange. Perfect for lenders as well as telecommunications and utility providers, this data exchange enables companies to evaluate small business applicants, even with little or no credit history. The exchange includes an applicant credit score and detailed information to support know your customer (KYC) and anti-money laundering (AML) compliance programs.

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