Loan Provider Partners with Equifax for Small Business Credit Scoring

by Mercator Advisory Group 0

Small business loan provider On Deck Capital has announced the co-development with Equifax Commercial Information Solutions of the proprietary On Deck Score. This score is based on the lender’s platform and historical data from 2006 onward – a period during which On Deck funded over $100M to “main street” businesses. The use for merchant service providers is clear, since the majority of merchants globally who sign for card acceptance services are underwritten primarily based on the personal credit of the merchant principal.

If the new scoring solution gains adoption among banks in their small business lending operations, it could be competitive to merchant cash advance providers, some of whom have built their own proprietary scoring mechanisms and who target the same market with a product positioned as an alternative to bank funding.

“Increased economic pressures and other factors have made it cost prohibitive to spend 100 hours underwriting a florist for a $20,000 loan. We believe that these types of challenges make delivering financing to Main Street a problem of time and cost,” said Mitch Jacobs, founder and chief executive officer, On Deck. “On Deck is committed to addressing this issue by leveraging new and unique technology to analyze the true health of this unique category of business – providing Main Street the opportunity to access the capital it needs to grow.”

Banks have historically faced challenges making loans to the Main Street market as they lacked an efficient way to analyze businesses for sub-$100,000 loans. As a result, they have judged these businesses like individual borrowers – underwriting commercial loans based on a consumer credit score. This approach has prevented millions of creditworthy Main Street businesses from accessing the capital they need to grow and expand.

Recently, Equifax conducted extensive score trend analysis and validation on On Deck’s latest custom scoring model designed to evaluate and segment the small business market in a new and unique way.

“As the economy continues to make its comeback, business lenders must apply the right combination of innovation and technology to serve the needs of key market sectors while minimizing risk and limiting credit exposure,” said Dr. Reza Barazesh, senior vice president, Equifax Commercial Information Solutions. “On Deck has proven itself a leader by using innovative technology to analyze the Main Street market in unique and efficient ways.”

The cloud-based On Deck platform provides turnkey underwriting, monitoring, cash management and collections functions – providing the marketplace with a blueprint to better serve the massive Main Street segment. Businesses go to to create a business profile, which links to electronic data sources including online banking, accounting and merchant processing. That information is combined with social, tax, industry and firmographic data to create a complete financial profile of the business never before available.

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