Think about all the information flowing between your business and your customers every day. This is “big data,” the total picture of every financial and social interaction that occurs during the regular course of doing business. This type of data also includes credit information, current and past borrowing behaviors and the ups and downs of your company’s cash flow.
The availability of such a comprehensive representation of credit-worthiness is leading some of the top alternative lenders to rely more on big data than traditional methods of risk assessment. That means the data representing your business is increasingly important if you’re looking for loans over a short term or another type of business lending.
Alternative Lenders are Leveraging Data
With the extensive paperwork and wait time involved in obtaining bank loans, alternative lending options such as Kabbage and OnDeck are becoming more popular. These same lenders have more flexibility to monitor business data than banks do, allowing them to use the flow of information to determine if a particular company is worth investing in.
For a business owner, obtaining an alternative loan based on this data stream may be much easier than going through the bank loan process. Being able to present a picture of the overall patterns of business operation means you’re less likely to be turned down for a slightly low credit score or one unfavorable cash flow cycle.
Signals to Watch For
Lenders look at many elements when assessing the total collection of data from a business, but these are some of the biggest players when it comes to determining whether or not you get a loan:
• Marketing data, including how diligent you are with ad campaigns and how many conversions are generated
• Omni-channel content creation that includes a variety of engaging mediums
• Social media activity, content, shares and interactions
A More Flexible Approach
The option of offering a lender a continual stream of data about the health of your business can open up more opportunities for short term loans and other types of business lending. Instead of being locked into a rigid payment schedule regardless of cash flow, it becomes possible to adjust loan terms in response to changing market conditions. Alternative lenders can monitor how your business normally performs and recognize when unusual circumstances arise. Should the unexpected happen and you become unable to support your payments, the lender may be willing to work with you to come up with a plan to ease the financial burden until you get back on your feet.
In the long run, the use of big data to determine whether or not to offer business lending could be better for both companies and lenders. The more signals you can provide, the easier it is to prove that you can be trusted to put the money to good use and pay it back on time. Working with an alternative lender that understands your needs from moment to moment gives you the flexibility to borrow and grow your business with confidence.
