Merchant Advance Blog

Blog Article: Online Business Lending: Data-Driven Approaches

As an organization, Merchant Advance Capital is proud to offer small businesses the chance to obtain funding that traditional bank lending may not be able to provide. We have spoken at length on this blog about what makes our methods different from those employed by providers of traditional loans, primarily:

  • Rapid Funding through Online Application
  • Flexibility of Repayment Options
  • Alignment with Your Business Success
  • Automation of Repayment

In a paper published earlier this year, Harvard Business School Senior Fellow Karen G. Mills explores the economic ramifications of the 2008 American credit crisis and the effect of the crisis on access to credit for small businesses. Mills’ paper also charts the rapid development of online business lending services in the United States as a product of both the fallout from the 2008 crisis, and of the emergence of new technologically driven approaches to assessing business credit-worthiness. Mills’ paper, titled The State of Small Business Lending: Credit Access during the Recovery and How Technology May Change the Game, is broad in scope and an involved read to be sure (if desired, it can be viewed in full here), and it is directly focused on certain issues particular to American markets: however, its conclusions undoubtedly support the four points listed above.

“New entrants are innovating and using technology in ways that improve access, time needed for delivery of capital, and the overall borrower experience.” – Mills, “The State of Small Business Lending”, p.56

As an online business lending provider, Merchant Advance Capital strives to use many emerging resources and tools to assess businesses’ credit-worthiness and the options available to them. The figure below shows key ways that online lenders are taking advantage of highly data-driven methods to learn more about small businesses and their financial situations.

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“Big data” is a term that has enjoyed great popularity in recent times: folding together elements of cloud documentation, statistics, analytics, and SEO, it defines the drive to understand how businesses exist, interact, communicate and profit through information available online. We believe that “big” data, at least big in scope, is a valuable resource for small business. Whether it’s your business’ credit score, its bank statements, or even your activity on social media, all of these seemingly disparate items can be brought together to create informative (and sometimes predictive) models for making the funding process as effective and efficient for you, the customer, as possible.

Data-centric methods have significant implications on the business side as well. As Kimberly Songer explains in a 2011 online report for Davis and Henderson:

“By housing all lending and credit data in a single location, you enable everyone working on the loan documentation to collaborate, from the person selling the loan to those behind the scenes doing the heavy lifting. The loan officer can enter the financials, which can electronically move through the workflow for input from other people, then route back to the originator in one system… Just as important, all of the data, ratings logic and rationale behind the loan or credit decision now resides with the account detail in the database, making it easily extractable for reports, regulatory audits or ongoing risk assessment.”

Methods like these are forming the core of how we work at Merchant Advance Capital. A data-driven approach to online business lending is making it easier for businesses everywhere to apply for and receive funding quickly and without disruption to their business cycle.

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