Tracking Changes in Small Business Risk Profiles Challenges Lenders

5/10/2017

ATLANTA — LexisNexis® Risk Solutions has identified a growing trend among lenders that serve small businesses—namely, the difficulty of tracking changes in the status of their risk profile.  A suite of products, including Small Business Monitoring, assists lenders with client account management by monitoring for changes in small business accounts and setting thresholds to determine the significance of the changes.

Underwriting small business loans and issuing small business credit cards is a big and growing business for lenders.  However, after establishing the credit relationship, the dynamics within a small business often change—growth projections can shift, economic conditions fluctuate, regulations evolve, and many headwinds can prevail.  These changes may put the lender at risk of an underperforming borrower, resulting in loss of interest payments or even a loss of principal.  Conversely, being unaware of positive changes also can result in a lost opportunity to upsell the customer.  Given the continuously evolving business and financial services environment, it is imperative for an organization to stay updated on the status of the credit accounts for its small business customers.

Ben Cutler, senior director, Small Business Risk Management, LexisNexis Risk Solutions, commented: “The environment for doing business can easily change, and these changes can have a big impact on a small business.  Still, small businesses drive a recovering economy and account for an estimated 60 to 80 percent of U.S. jobs.  Lending to small businesses means it’s vitally important that lenders know as much as possible about these businesses and the changes they go through.  These changes can be positive or negative, but proactively monitoring accounts will enable lenders to avoid unwelcome surprises or get a head-start with positive developments.  For example, by using LexisNexis Small Business Monitoring, lenders can proactively manage their small business accounts by providing alerts on negative and positive changes.”

Lenders need to track movement in small business customer credit profiles—changes such as new account openings, delinquencies, charge-offs and changes in credit scores.  They also need to monitor for material public record events such as bankruptcies, judgments and liens.  The Small Business Monitoring system incorporates the vast LexisNexis Risk Solutions data repository to monitor portfolios for targeted, material changes and updates.  It also allows financial institutions to set thresholds that trigger whether the observed change is significant, eliminating unnecessary account alerts and enabling banks to focus only on the important events.

Cutler added: “Small businesses have historically been difficult to risk assess because there is a lack of information on them.  Now, through the use of data and technology, they can be vetted and included in the financial system without adding risk to lenders.  LexisNexis Risk Solutions combines leading-edge data from more than thousands of sources with analytic linking technologies to uncover millions of business entities that were previously invisible.  With lenders, our goal of increasing financial inclusion and establishing creditworthiness for small businesses is achievable.”

About LexisNexis Risk Solutions
LexisNexis^® Risk Solutions harnesses the power of data, sophisticated analytics platforms and technology solutions to provide insights that help businesses across multiple industries and governmental entities reduce risk and improve decisions to benefit people around the globe. Headquartered in metro Atlanta, Georgia, we have offices throughout the world and are part of RELX (LSE: REL/NYSE: RELX), a global provider of information-based analytics and decision tools for professional and business customers. For more information, please visit LexisNexis Risk Solutions and RELX.