Access Financing, Lender Compliance

In today’s internet and lending technology everything is being done, approved and promoted by bots also known as algorithms. These algorithms are now determining if a business loan application gets approved, for how much, at what rate and how long of a term they are given to pay it back. The bots are analyzing the percentage of risk of default the business presents or in other words how likely it is to fail and when.

The Lender Bots look at statistical data going backwards to see specific trends and to determine if a business fits into any of those trends or falls into any of those categories. What they see is that certain things that small businesses do or are doing place them into a category where previous small businesses who have already defaulted on their business loans did those things.

Let’s look at a few of those things:

• Not having an entity - The historical data on small businesses that operate as a sole proprietorship has shown those businesses default on their business loans at rates of 10 to 20 times higher than those small businesses operating as an LLC or Corporation.
• Not having a physical business location - Small businesses that have a physical business location where their address they are located is listed by the US Postal Service database as a “Business Address” have historically defaulted on their business loans at rates or 10 to 20 times less than those small businesses operating from a residential address or mailstop, again as listed in the USPS data.
• Not having a Google Business profile - While the data on this statistic is newer than the other listed here, the numbers are already showing that those small businesses with a Google Business profile are far more likely to repay their debts than are those small businesses who fail to obtain a Google profile.
• Not having a professional email account - This one is kind of surprising, but small businesses who operate their businesses with free email account where their primary email addresses are gmail, yahoo, hotmail, etc. have historically defaulted on their business loans at vastly higher rates than those businesses with professional email accounts such as john.doe@xzybusinessname.com.
• Not having a business phone - Much like the USPS business address, the FCC (Federal Communication Commission) maintains a database of all registered phone numbers in the United States and lists what type of phone number it is. Small businesses that operate their business from a phone number that is listed as a cell number have historically defaulted on their business loans at rates of 10 to 20 times higher than those businesses operating from FCC listed business numbers.

Business lenders have approval algorithms that their computers run on businesses

Those algorithms determine if a business is a high or a low risk of defaulting on a loan. There are a series of historical items they are checking from business borrowers who have already defaulted to determine common themes about those borrowers.

As you can see from the above examples what they have found is that if a business operates solely from a cell phone, or from a residence, or from a free email provider, or as a sole proprietor then any one of those items has already shown the business to be 10 to 20 times more likely to default on their loan. That gets the business categorized as a very high risk of default and therefore will only be eligible for very high interest rates, much smaller loan amounts and extremely short repayment periods.

There are many more of the high-risk category items that lender algorithms are now looking at. Inside our system we show all these High-Risk categories and how to position your business prospects to be viewed as a low risk of default, thereby increasing their opportunities for more approvals, higher amounts, and better terms.