Alternative Lending Set to Boost Small Business Strength in 2018

Small business lending saw a 2017 surge, according to the U.S. Small Business Credit Monthly Report from PayNet, with 11 of 18 sectors experiencing a lending increase over the past 12 months.

Experts believe 2018 will continue to foster a friendly environment for smaller enterprises.

“A combination of small business optimism and favorable tax changes will likely spur increased demand for small business loans in 2018,” Gerri Detweiler, education director at Nav, tells deBanked. “This, combined with personal credit scores and business credit scores at all-time highs, means 2018 should be another record year for small business lending.”

Detweiler added that big banks have begun to fine tune their incorporation of alternative data sources into underwriting decisions. She believes that those who continue to do this well are on track for a “very good year” in 2018.

Head of marketing at Fundbox, Greg Powell, also believes in the strength of alternative data as a catalyst for small business growth due to more flexible vetting processes.

“Over 60% of small businesses are looking to make a capital investment in the year 2018,” he said. “On the supply side, you have a growing wealth of options that small businesses can choose from. That for me would be a cause for a lot of optimism of starting out a new business in the year 2018.”

“What we’re seeing is a fundamental shift in the way that businesses can be underwritten,” Powell continued,” adding that Fundbox and others like it are able to reach small businesses that no one else can.

Fundbox bypasses the need for a small business owner’s personal credit score or personal guarantee by putting more focus on factors such as the value of the borrower’s previous three months worth of transaction value and a flexible benchmark of $50K or more in annual revenues.

Lending standards such as this have led to a loan application climate that is “a lot more fluid than in the past,” according to Powell.