Tag Archives: Small Business Lending

Risk & Compliance Attention Small Business Lenders!  The CFPB is Calling on You.

May312017

Update: The CFPB has extended the public comment deadline. Comments are now due by September 14. On May 10, the Consumer Financial Protection Bureau (CFPB) issued a Request for Information (RFI) seeking to learn more about the small business lending market.  If you are scratching your head as to why the CFPB is delving into small business lending, you are not alone. The CFPB was created to regulate those engaged in offering or providing consumer financial products or services.  Yet tucked into the massive Dodd-Frank Act is a small provision, section 1071, which requires the CFPB to issue rules regarding the collection of data to help identify needs and opportunities in the small business lending market and to facilitate enforcement of fair lending laws. For many years, this provision has been a lower priority for the CFPB. However, with the issuance of many of the most high profile Dodd-Frank regulations, the... [Read More]

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Risk & Compliance Afraid of Small Business Lending? Mid-Market Lenders Shouldn’t Be

Small Business Lending for Mid-Market
Apr052017

Some 500,000 – 600,000 new small businesses emerge each year, according to recent U.S. Census Bureau data, and they supply over 60% of jobs. While we’ve expected that number to grow and fuel the economy, it is starting to decrease according to recent reports by TIME and CNN Money. Is small business growth slowing due to lack of innovation and initiative? That seems unlikely. According to a survey done by Insureon, 82% of small businesses expect to grow in 2017. Whether buying new equipment or furniture, hiring, moving, or adding products/services, businesses are planning to expand. So what’s really standing in the way? FICO’s mid-market bank and credit union clients tell us that it remains difficult for entrepreneurs and small business owners to acquire the credit they need to fuel their growth plans. The reasons for this are two-fold. First, there is often little traditional commercial credit history available on... [Read More]

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Risk & Compliance How to Rate Trade Credit Risk – Without Much Data

Darth Vader meme: I Find Your Lack of Data...Disturbing
Mar282017

Allowing people or businesses to pay for things on credit is an ancient practice, and just as ancient is the dilemma: How can you tell if they will pay you back? We know how this works when lending to individuals, but sometimes granting trade credit is trickier. I recently went to visit a new FICO client who are involved in the bunkering industry. Bunkering is the business of providing fuel to shipping, and our client offers credit lines to cruise lines, oil firms and any company that needs to fill up its large vessels with black gold and all its refined derivatives. Like any other institution that offers trade credit (typical firms will pay a bunkering firm within 30 days for the fuel it has purchased), they have a bad debt problem, which is particularly important in an industry with small margins. Although some bunkering firms have turnovers well into... [Read More]

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Risk & Compliance Improving Small Business Lending: Q&A with Ascentium

Jan052017

Ascentium Capital, an innovative commercial lender, wanted to expand its growing small business portfolio while keeping risk in check. I recently had the chance to speak with Chris Miller, VP of Decision Analytics at Ascentium, on how the company makes quick lending decisions for its small business customers. Please tell me a bit more about Ascentium Capital and what makes you unique? Chris: Ascentium is a commercial lender with a focus on equipment and technology leasing. We’ve grown in five years to have over $1.2 billion in assets and to be the third-largest private-independent finance company. We see ourselves as a small business lender working on making life easier for small business owners. We do that by making access to capital easier using our proprietary finance platform combined with exceptional service. Our basic premise is we can make an application decision in two hours, though it only takes about an... [Read More]

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Customer Engagement Streamlining Small Business Loans: Q&A with Harborstone

Harborstone small business cover image
Jul122016

Harborstone Credit Union has managed to increase its small business loan volume by 250%—with no delinquencies—since deployment two years ago. I recently had the chance to talk with Jeff Ivey, Harborstone’s Senior Vice President and Chief Sales and Service Officer, about how the credit union has used the FICO® Small Business Scoring Service℠ (or SBSS℠) solution to streamline its small business loan process, making things better and easier for both Harborstone and its members. Based in Tacoma, Washington, Harborstone Credit Union serves more than 75,000 consumer and small business accounts through its 16 branches. Q: What makes Harborstone different from other credit unions and commercial banks? Jeff: Our customer focus is our prime differentiator. We’re smaller than some competitors, we’re fully member owned, and we make sure that every member gets personal attention and feels like a part of Harborstone, not just an account number on a statement. We also... [Read More]

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Customer Engagement The Catch-22 in Small Business Credit

Mar192015

From China to Spain, United Arab Emirates to the United States, governments are recognizing the importance of small and medium-sized enterprises (SMEs) as an engine of employment and economic growth. The challenge that governments and financial institutions face when looking to expand SME credit is that often these loan amounts are too small for creditors to earn enough, especially if they have a costly originations process. How can they break out of this Catch-22? Creditors must make careful decisions – often with less information – or they can subject themselves to losses. FICO’s experience with SME lending around the globe gives us some insight on how to tackle this challenge. Current levels of automation vary widely, with many developed countries fully automated and others just implementing their first systems. Still, at the core, the answer for all institutions revolves around scoring, analytics and agile decisions. For those with limited automation,... [Read More]

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Risk & Compliance Clearing Up Misconceptions About Small Business Scores

Sep172014

Recently, the head of the Small Business Administration, Maria Contreras-Sweet, gave a speech at the Center for American Progress where she detailed the agency’s expanded use of small business credit scores in an effort to streamline the lending process, improve accuracy, ensure fairness and, most importantly, facilitate the provision of more small loans to the nation’s entrepreneurs. This brought smiles to us at FICO, however, it was clear from the resulting media coverage there’s still some confusion about what exactly is a small business credit score. In this post, I hope to shed some additional light on this topic. Perhaps the biggest misconception to clear up is that a small business credit score is not the same as a consumer’s FICO® Score. Unlike the FICO Score, which leverages information solely from the consumer credit report, small business credit scores consider multiple types of data from different sources. First is data... [Read More]

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Risk & Compliance Housing Bubble Inflating?

Jul082014

The latest installment of our quarterly survey of risk managers at U.S. and Canadian banks shows real concern about a possible re-inflation of the real estate bubble. In the survey, 56% of respondents directly involved in mortgage lending expressed moderate to heavy concern that “an unsustainable real estate bubble is inflating.” The actual data I’ve seen is a mixed bag. There are roughly six million homeowners in the U.S. still underwater on their mortgages. The average negative equity among those six million households is 33%. That level of negative equity won’t disappear anytime soon. However, home prices are soaring in many cities, and total homeowner equity in the U.S. is at its highest level since late 2007. I’m not sure that is a tenable situation. Given that state of affairs, I understand why many lenders in both Canada and the U.S. are concerned about the risk in residential mortgages. The... [Read More]

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Customer Engagement Join Us For FICO World 2014

May212014

Attracting, serving and protecting customers is getting tougher, so how are companies using predictive analytics to out-maneuver competitors and win customer loyalty? Join us at FICO World 2014 to discover answers from experts and network with your peers. Registration is now open for the conference, which will be held November 11-14 in San Diego, California.

FICO World has become the leading global conference on analytics-powered customer engagement strategies. This year’s theme, “The New Customer Imperative,” stems from the convergence of social, mobile and cloud, which is evolving customer behaviors and expectations, revolutionizing business and society, disrupting old business models, and creating new leaders. We’ll explore this theme through a number of sessions, speakers and events, including:

100+ presentations on analytic innovation, credit scoring, customer growth and retention, customer originations, debt management, fraud and security, mortgage lending, regulatory compliance, and small business lending.

Keynote presenters Theresa Payton,...

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