Expanding Opportunity and Access in Small Business Lending with New Technology

Small- and medium-sized business (SMB) lending has evolved in recent years, thanks in large part to advancements in technology. Innovations like artificial intelligence (AI), combined with alternative data, have opened new doors for both lenders and SMBs. And, these advancements allow organizations to simultaneously improve efficiency and expand access to credit for traditionally underserved markets.

The Role of AI in SMB Lending

Lenders are already leveraging AI to refine their lending practices and offer more customized solutions to SMBs. While AI has been leveraged in consumer lending for several years, its role in SMB lending is growing rapidly. AI is instrumental in areas like business verification, fraud detection, and commercial credit scoring. By incorporating vast datasets like commercial merchant and credit data, lenders are able to look beyond traditional credit scores and make better-informed decisions.

Data: The Lifeblood of AI in SMB Lending

High-quality data is crucial for successfully implementing AI. Lenders must prioritize data management, as the quality of insights and predictions directly depends on the accuracy and completeness of the data used. Compared to consumer lending, SMB lenders must take specific business attributes into account. For example, inventory levels differ significantly between industries – an online retailer holds physical stock, while a consulting firm does not. These nuances create diverse financial profiles, making it challenging to apply uniform lending models. Consequently, SMB lenders often require additional verification of assets and business financials, unlike in consumer lending. 

Dealing with this issue requires solutions that combine both business owner and commercial credit data, giving lenders a comprehensive view of a business’s financial health. Utilizing both consumer and commercial data, along with the incorporation of alternative data sources, such as cash flow and merchant data, offers a more nuanced understanding of creditworthiness. With over 5.5 million businesses available in the Commercial Merchant Data network, lenders can extend credit to businesses that might otherwise be considered too risky, based solely on conventional credit models.

Responsible AI

Equifax has adopted a set of guiding Principles, designed to operationalize Responsible AI and help ensure that Equifax consistently and appropriately designs, implements, and uses AI Systems for approved use cases.  This approach enables Equifax to maintain trust with consumers and its customers while navigating a changing regulatory environment. 

To learn more about how Equifax uses AI and how it can help you, visit the EFX.AI page. 

To discover how to utilize a combination of both personal and commercial credit data, check out OneScore for Commercial.