What’s Keeping Businesses
From The Capital
They Need?
85%
of small business owners say they are looking for faster and easier access to capital
Source: Mastercard Rise Of Open Banking Study
Borrowers Face A Tightening Credit Market
In the last few years, small businesses have encountered what Siegel calls “a perfect storm” of adverse financial conditions. First, inflation squeezed their margins. Then, troubles in the regional banking sector led to a more general tightening of credit. The proportion of small businesses that have been fully approved for financing has declined since the pandemic began, though it recovered somewhat in 2022.
Lending applications require Significant paperwork
Many small business loan applications require the owner’s and business’ tax returns, a lengthy financial statement detailing assets and liabilities and a business plan. For first-time applicants, that leaves room for error, says Ginger Siegel, North America Small Business Lead at Mastercard. “One of the top reasons small businesses are not approved for loans is because of an incomplete application,” says Siegel. “There’s a lot of hesitancy because of the amount of paperwork.”
Lenders Receive An Incomplete Picture Of The Business
An application can be outdated on submission if the business took a turn since its last tax return. And many owners commingle personal and business assets, making it difficult for lenders to get a true picture of a business’ financial health. Some banks make lending decisions based on an owner’s personal credit history, which can disproportionately disadvantage Black and Hispanic communities, where lower credit scores and credit invisibility are more common.
74%
of small businesses would share performance data with lenders if it would reduce reliance on credit scores
Source: Mastercard Rise Of Open Banking Study
How Does
Open banking Technology transform the lending process?
Provides A Comprehensive,
Timely Business Snapshot
Lendio is a small business financing marketplace that works with one of Mastercard’s open banking platforms which provides coverage to 95% of deposit accounts in the U.S. Business owners who fill out a 15-minute application on Lendio can receive capital in as little as 24 hours. With Mastercard, Lendio helps borrowers easily compare loan and financing products from dozens of lenders, while lenders can compete for a much larger base of customers.
During the pandemic, Lendio connected small businesses to billions of dollars in funding using Mastercard’s secure open banking data.
Streamlines Applications For All
Kinds Of Financial Products
Gives Businesses Greater Choice
86%
of small business owners
wish they could better use business financial data to make informed decisions
Source: Mastercard Rise Of Open Banking Study
How Does Open Banking Help Businesses Plan For The Future?
A Unified Picture To Make Better Choices
The average small business deals with between 10 and 25 transaction platforms such as banks, payment systems and online sellers, Siegel says. Using an open banking model can also provide businesses with a consolidated perspective of cash flow to help with capital expenditure and planning decisions–all necessary for the future well-being of their company.
As integrated, digital financial tools become the norm, open banking is the conduit for real-time, powerful data to help businesses plan for tomorrow and get the credit they need. Ultimately, Mastercard wants to empower small businesses to gain control over their data, opening doors to tailored solutions that provide more choice and revolutionizing their financial experiences.
“Small businesses are looking for advice and guidance for their decisions now, a year, two years from now,” says Siegel, adding that Mastercard’s services can help financial institutions enhance their own support for SMB customers. “We are helping to derive meaningful insights from the data to help our customers better serve small businesses.”
See what’s possible when you partner with Mastercard. Mastercard is working with small businesses around the world to help them benefit from their financial data and stay competitive in an ever-changing environment. Learn More
With open banking, business owners can permit lenders to review their bank and merchant account (card payment) information. Mastercard’s Open Banking for Business can analyze, detect and categorize two years of transactions, balances, cash flow, loan payments and non-sufficient fund histories, giving owners the agency to safely share their data with lenders to render a more holistic view of their company’s finances and ability to repay a loan.
This real-time data integrated into lenders’ models allows for closer monitoring of a business’ health and a more accurate prediction of default. Lenders can still consider current business performance, personal credit scores and the broader economic trends already factored into credit decisions.
Open banking speeds up the business lending process at every stage, from onboarding to application to closing, Siegel says.
But it can also streamline processes for other financial products such as checking accounts, investment accounts, personal loans and mortgages.
Siegel says open banking’s ability to assess a wider variety of data can help even the playing field, especially for owners who have gone through a rough patch or have a reduced credit score. “Open banking democratizes opportunity for all businesses,” she says.
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