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How business data can enhance commercial lending


When it comes to commercial lending, data quality and data quantity are important. With business data often limited in what’s available (due to new companies being formed and not as much transactional and behavioural data as consumer data), lenders are having to create a data strategy that considers both quality and quantity. Do you have enough? Is it right? Is it accurate?

There are key differences in the different types of data and how they are used. Some key points to consider include:

  • New customers have a weaker footprint. Meaning there is less internally generated data available to use to make decisions on
  • Risk models are generally geared more towards internal data – and therefore the lack of this may impact your decisions
  • Effective data and risk strategies can help you with delivering better customer focused decisions

With the arrival of new data services driven by the Mandatory Credit Data Sharing initiative (MCDS), plus requirements to better serve customers with Open Banking, the above 3 points can help you focus your efforts to deliver better customer outcomes.

Data is often combined with the full range of consumer bureau data assets in order to make better decisions. But, with so much data available, you need to get a view as to what adds value – and when.

The differences between new and existing customer data

The key difference between data for new and data for existing customers is that existing customer lending decisions are typically driven as a customer management activity that uses historical data as part of the decision making process. Whereas new customers are likely to need additional data in order to help ascertain the right decisions.

With data growing all the time, lending journeys have the opportunity to become more automated – regardless of whether you are looking at a new, or existing customer. With switching on the rise, and due to become ever more apparent following Open Banking, you need to ensure you get the right automation journey in place. By doing so you can reduce the threat of losing custom through a poorer service, but also reduce your overheads as less manual underwriting is needed.

Assessing an applicant’s risk should incorporate multiple factors. Including credit stability and how much they can afford. By using the right tools you can give the most appropriate price and product for the individual business. To help you achieve this view business bureau data can be used. It can help you conduct a risk assessment of the business:

  • A risk assessment of business customers can be done using scoring models. Tools such as Delphi scorecards can incorporate internal and external data to help you reach a decision. They can be tailored to consider your policy rules. For example, if an account has a CCJ or arrears noted on their file.
  • Assess how much the business can afford. This typically uses elements of bureau data to understand what the businesses affordable limit is, in particular:
    • Income – net sales from financials, or credit turnover from the MCDS Data.
    • Outgoings – based on the cost of sales from the company financials or debit turnover from the MCDS data
    • Existing credit commitments identified from Commercial CAIS

Data can have a significant value to you and can help inform your decision making. It can qualify and quantify the best terms and offer a more accurate and robust measure when it comes to lending.

To find out more about Experian’s commercial data, please get in touch 

This article is about: commercial lending, data sharing, Mandatory Credit Data Sharing initiative, SME