Big Data Comes to Small Business Online Lending
Kabbage's home-grown technology automates the lending process and gleans insights from social media and shipping data.May 1
Capital Access Network (CAN) is trying to bring a mix of broad data sourcing and analytics to an online lending portal that it hopes will bring credit to small business borrowers that the company contends are getting lost in the scoring shuffle elsewhere.
This week it launched an online lending engine called CapTap. The lending product draws on a database of about $2.6 billion in small business credit extended through CAN over more than a decade, covering a variety of economic cycles and more than 750 different types of businesses. The company says this data can inform precise decisions on small business borrowers that may have limited credit histories, or unintended marks on their credit record.
"Often the decisions that you make to run a successful small business fly in the face of things that can go into a good traditional credit score. You may buy inventory for your business at a discount, but run up a credit card bill in the process, and that can impact your score," says Glenn Goldman, CEO of Capital Access Network.
CAN is joining a growing list of companies chasing small business loans by using alternative data sourcing. These companies include Kabbage, which uses social media data as part of lending decisions, and Amazon, which recently began making online loans to merchants.
In Amazon's case, the company will also earn revenue on the sales of inventory that gets purchased.
Lighter Capital also uses social networking data and revenue-based financing to help fund early stage entrepreneurs.
Outside of small business, companies such as ZestCash, BillFloat and LendingClub are also using internally-developed analytics and behavioral analysis to spot borrowers that have poor "traditional" credit but are otherwise solid borrowers. While CAN is not competing directly with those companies, it does considers its methods to be an alternative to FICO, which did not respond to a request for comment.
To run its site, CAN has assembled a number of tech startup and business experts to run the digital team behind the site. Eric Burd, CAN's vice president and general manager, joins the company from TheLadders, where he oversaw consumer subscription services for the executive recruitment network. Other new executives include Daniel Flax, vice president of engineering, who comes to CAN from TheStreet, where he was chief information officer, as well as stint at NYSE Euronext (NRX) where he led the tech transition to a hybrid market (a mix of electronic and floor trading). Also, Jodi Leo comes to CAN as vice president of product design; and Inna Kurbatsky is the director of digital marketing. Leo was director of innovation at Fidelity Investments; and Kurbatsky has experience in social marketing and has held positions at Reuters (TRI) and E-Trade (ETFC).
At CAN, they will help oversee an internally developed site that leverages analytics, borrower data and past lending experiences in different economic climates to identify and price small business credit.
Initially, potential borrowers will log into the site and fill out an application, and will then be contacted by phone by CAN representatives for a follow up in which more information is gathered. In about three months, CAN will launch version two of the site, including the ability to complete more of the process online, with faster access to funding. A third, mobile version will follow.
CAN has a funding capacity of about $1 billion, based on its own resources and a line of credit with banks such as Wells Fargo (WFC), Fifth Third (FITB) and Goldman Sachs (GS). All loans are made by CAN's partner, WebBank, a Utah-chartered industrial bank.
"Our view is that the user experience goes way beyond the application experience. It's about how often you can get the user to say yes, and how many different types of businesses you can say yes to and how flexible you can be with the terms," Goldman says.