Tag Archives: Small Business Lending

Risk & Compliance How Lenders Can Better Support Small Business Growth in their Communities


Small business credit access grew in 2018 and with modifications to the Small Business Administration (SBA) rules for more streamlined processing, access is predicted to grow. However, untapped opportunities for growth remain for startups and minority owned businesses as suggested in SBA research. What are the funding options for these groups that the SBA is offering and how can your organization better serve them as well? This issue was discussed at the NAGGL 2019, National Association of Government Guaranteed Lenders, conference where hundreds of SBA lenders gathered to learn about policy changes, SBA online application submission solutions, how to create successful sales reps, and other trends in the industry impacting SBA lenders. SBA programs give businesses access to credit such as 7(a) loans for any purpose, microloans and 504 Certified Development Company (CDC) Loans for fixed-rate mortgage and equipment financing. Other programs are available to businesses to find investors, conduct... [Read More]

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Risk & Compliance Accelerating and Automating Small Business Lending

Accelerating and automating small business lending

Loans issued in days rather than weeks while bad debts reduced to 3 percent of loan book Malaysia’s Credit Guarantee Corporation (CGC), a government and commercial enterprise joint venture, has used FICO’s decision management technology to improve its ability to judge the creditworthiness of small businesses so it can provide them with loans. This direct lending is an expansion of CGC’s usual role of providing loan guarantees to businesses, many of which lack the collateral and track record to obtain regular financing. Since its deployment of FICO® Blaze Advisor® decision rules management system and custom analytic models in August 2016, CGC has reduced non-performing loans to just 3 percent of the loan book and has had only one default. For its achievements, CGC has won the 2017 FICO Decisions Award for Decision Management Innovation. The winners of the FICO Decisions Awards were spotlighted at FICO World 2018, the Decisions Conference, April 16-19... [Read More]

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


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

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

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


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

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


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


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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