The Alternative Data Powering Small Business Loans and Top U.S. Consumer Lenders – Tearsheet

Alternative data powers SME lending

Historically, the small business sector has been difficult to insure through traditional methods, but its complexities are beginning to be understood through the power of alternative data.

SMEs still struggle to get financing from big banks – only 15% get approved for a loan. They are considered high risk and expensive to underwrite, and credit reporting agencies don’t focus much on this area. The available data mainly revolved around accounting and banking records.

But now there is alternative data – information from various external resources, such as economic market indicators, demographic data, point-of-sale transactions, website and mobile device data, and even satellite images.

Alternative data has been among the main drivers behind the growing interest in SME lending. In 2020, the United States was the largest alternative finance market.

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