We know that small business is the heart of the U.S. economy, driving the majority of private-sector employment. But just how successful in managing credit is the average small business owner compared with the average consumer?  In a new data study titled The Face of Small Business, Experian examines key credit and demographic attributes of both groups and uncovered distinct differences. Experian presented the full research from our data study in a webinar recently. Watch Webinar Experian took a random sample of 2.5 million small businesses and 1 million consumers to base the research. Findings show that small-business owners outpace consumers when it comes to credit management. For example, the average personal credit score for a small-business owner is 721 — 48 points higher than the average consumer score of 673. Small-business owners also have a higher amount of available credit, with an average credit limit of $56,100; while consumers have an average credit limit of $26,900. Debt load, however, is also higher for small-business owners, with the average total balance of all trades being $195,000 versus $96,000 for consumers. Small business owners have higher monthly payment obligations with an average payment of $2,032 compared to $954 for consumers. Despite these differences, only a relatively small percentage of small-business owners (5.9 percent) have one or more revolving bankcard trades that are 90-plus days beyond terms in the past 24 months compared with 7 percent of consumers. Download our Infographic “Since the health of small business tells the tale of how the overall economy is performing, it is encouraging to see that while small-business owners have an exceptional amount of credit available to them and carry a higher debt load, they have done a great job managing their payment obligations and keeping utilization low. In order to explore possibilities and pursue opportunities, consumers and small-business owners alike need to master the credit management skills that will allow them to achieve their dreams — whether that dream is to start or expand a business or to finance a new home or vehicle.” Pete Bolin Director of Consulting and Analytics Experian Demographic differences In terms of demographic characteristics, small-business owners are more likely to own a home and have a higher income than the average consumer. For example, the average income for small-business owners is $91,600 versus $70,400 for consumers. Also, 62 percent of small business owners own a home compared with only 47 percent of consumers. Small-business owners tend to be a bit older and are more likely to have pursued higher education than the average consumer. The average age of a small-business owner is 56, and the average age of a consumer is 51. From an education perspective, 68.6 percent of small business owners have attended some college and beyond, while only 53.5 percent of consumers have done so. Other highlights from the report: The average mortgage balance for small-business owners is $192,000 versus $147,000 for consumers. The average number of open trades for small-business owners is 7.4 versus 4.4 for consumers. The balance-to-limit ratio for small-business owners is 29.5 percent compared with 30.1 percent for consumers. A higher percentage of small-business owners are married, with 68.3 percent having tied the knot versus 53.4 percent of consumers. The average gender breakdown for small-business owners is 65.6 percent male and 31.2 percent female. For consumers the mix is more equal, with 46.4 percent female and 47 percent male.

Latest Main Street Report findings offer cautious optimism as small business bankruptcy rates and delinquencies decline Experian has released the Q2 2016 Experian/Moody's Analytics Main Street report. The report offers a unique quarterly snapshot into the health of small business credit in the United States. The report states current credit conditions for small businesses are improving across most of the country. Overall small-business delinquencies decreased slightly from last quarter, with dropping levels in every stage of delinquency. The total bankruptcy rate fell as well, although at a slower pace than the previous year. "Small business owners have done a great job of managing their financial commitments and paying their bills on time over the past few quarters. This has led to an increased level of available capital which could enable them to expand or invest in their business to grow their enterprise. It will be very interesting, however, to watch the current trends unfold throughout the rest of the year as administration and potential policy changes, as well as the impact of Brexit and other global events could affect U.S. business behavior." Gavin Harding Sr. Business Consultant, Experian "Small businesses are doing well, and their near-term prospects are good. Delinquencies and bankruptcies are steadily declining, reflecting solid sales, low interest rates, and generally light debt loads. The only blemish is for businesses in the still struggling energy and related industries." Mark Zandi Chief Economist, Moody's Analytics   While current conditions enable small businesses to have an abundance of credit available to them, the average utilization rate was down almost 22 percent from the same period in 2015. The report found that this decline is the result of a slight increase in credit limits and a steady increase in balances. Other Q2 2016 highlights: The mining industry experienced the sharpest increase in severe delinquencies and bankruptcies across all industries in the second quarter. The transportation and utility industries also experienced a decline, with the average severe delinquency rate increasing by 30 basis points during the quarter. Construction has seen the strongest improvement, with severe delinquencies dropping by nearly one third in the last year and a half. Construction bankruptcy rates, however, remain high in West Virginia and New Mexico, with rates of 0.59 percent and 0.44 percent, respectively. Bankruptcy rates along the Eastern Seaboard tend to be below the national average. About the Experian/Moody's Analytics Main Street Report Developed by Experian and Moody’s Analytics, the Experian/Moody’s Analytics Main Street Report brings deep insight into the overall financial well-being of the small-business landscape, as well as provides commentary around what certain trends mean for credit grantors and the small-business community as a whole. Key factors comprised by the Main Street Report include a combination of business credit data (credit balances, delinquency rates, utilization rates, etc.) and macroeconomic information (employment rates, income, retail sales, investments, etc.)  

In just one week, Augmented Reality (AR) proved itself to be the Next Big Thing in popular entertainment. Within days of Niantic Labs release of Pokémon Go, in which players "hunt" and "capture" fantastical creatures using their smartphone cameras, tens of millions of Americans have become hooked on the game. According to media reports, the app has already been installed on twice as many phones as Tinder™, is used twice as much as Snapchat, and is surpassing the all-powerful Twitter in its number of daily active users. The skyrocketing value of parent company Nintendo's stock price has provided further testament to the game's perceived long-term stamina. Beyond its nostalgia value -- the game is based on the popular Japanese cartoon and videogame series from the 1990s -- Pokémon Go is winning over hearts, minds and dollars due to its artful blending of fantasy game play and real-world locations. To play the game, participants must move through the physical world, often traveling many blocks or even miles in search of their elusive digital prey. Such material engagement -- and the physical exertion required to complete many of the quests -- is a far cry from the sedentary "couch potato" stereotype so long associated with video-gaming. Marketing opportunities for local businesses It's also offering surprisingly lucrative marketing opportunities for many local businesses. Shops, restaurants and other commercial operations who find themselves near one of the game's many "Pokéstops"(virtual pit stops) and "gyms" (digital combat arenas) are seeing a marked uptick in foot traffic. Many stores are actively advertising via social media their proximity to game elements and the Pokémon that players have found nearby. Chicago's famed Art Institute received wide coverage for their boasting of various Pokémon found within their hallowed galleries, complete with iPhone screen shots of cartoon monsters perched amidst the Renoirs and Chagalls. Pokémon have invaded the Art Institute! Catch them if you can and find 14 PokéStops around the museum. #PokemonGO pic.twitter.com/MICPddACuf — Art Institute (@artinstitutechi) July 11, 2016 Assuming the appeal and popularity of AR is more than just a passing summer fad, the short-and long-term potential for local businesses appears to be huge. For example: Referrals: A referral program is one fast and easy way for local businesses to take advantage of the Pokémon Go phenomenon. For example, shop owners can offer to play for players' "incense," a virtual commodity used to attract the game's creatures, in exchange for the use of screenshots showing rare Pokémon that show up near their establishment. They can offer players similar rewards for store photos and check-in’s that players post on social media sites such as Yelp or Facebook. Shops can even offer game-based "bounties" for the capture of Pokémon found in or near their stores, thus driving up foot traffic. Local Sponsorships: Seeing a cash cow (or cash chiamander) when they see one, Niantic, Inc., is reportedly developing a program that will allow local businesses to actively sponsor themselves as Pokéstops or Pokémon hiding locations, virtually forcing eager monster-hunters through their doors. Sponsors will be charged on a "cost per visit" basis -- similar to "cost per click" fees on the Internet -- according to Niantic CEO John Hanke. National Sponsorships: As the success of Pokémon Go spurs the creation of other AR games and experiences, national sponsorships may provide developers with yet another, highly lucrative source of income. "National branding could be huge," said Mark Schaefer (@markwschaefer), globally-recognized speaker, educator, and business consultant. "Imagine, a Pokémon character drinking a Coca-Cola. That would be hilarious. The Nintendo stock price went through the roof because of that very idea." But such commercialization of the Pokémon Go experience must be done with discretion, according to Schaefer. "The whole Pokémon Go game experience is built on passion for this product; passion and trust," he explained. "Most players loved Pokémon as children. It's an emotional trigger. If the game starts to look like a NASCAR jacket, with ads all over it, people are going to reject it. But I think that, in this day and age, people expect a certain amount of sponsorship. There can even be a certain amount of surprise and delight associated with sponsorships. The key is to make such sponsorships integral to -- and in the spirit of -- the game itself." In a sense, Pokémon Go is the "Space Invaders" of AR, a breakout game that serves as a "proof of concept" for a whole new entertainment platform. Expect more, increasingly immersive and engaging games that seamlessly blend the physical and virtual worlds to follow. And with them, more opportunities for businesses large and small to generate real-world business by becoming part of the gaming experience. If you are a local business looking for some creative ways to capitalize on the Pokémon craze, check out Fundera's great blog post - How to use Pokémon Go to Drive Business.  

Experian Business Information Services and Moody’s Analytics have joined forces to develop the Experian/Moody’s Analytics Main Street Report.  The report leverages a combination of business credit data (including credit balances, delinquency rates and utilization rates) and macroeconomic data (including employment rates, income, retail sales and investments) to provide a more accurate assessment of the health of small businesses. Small businesses are the engine of the U.S. economy - employing the majority of U.S. workers, so with this quarterly report Experian seeks to provide a unique view into the health of those small businesses, offering a benchmark on their overall financial health, and emerging trends across major industry sectors. “Gaining deeper insight into the health of small businesses is important for credit-granting organizations, as well as the small-business owner. While credit grantors can leverage the information to make more profitable financial decisions, small-business owners can better understand the fluctuations in their industry and region. By working with Moody’s Analytics, we are able to combine our expertise and data resources to deliver a more holistic view of the trends impacting the business community in particular and the economy overall.” Gavin Harding, Sr. Business Consultant Experian, Global Consulting Practice Q1 2016 highlights The first quarter 2016 report shows that credit conditions for small businesses have remained relatively stable, as delinquency and bankruptcy rates hold steady at low levels. In fact, much of the slight decrease in delinquencies was driven by fewer small businesses falling within the 61 to 90 and 91+ days past due categories. Additionally, the Q1 2016 report shows that small businesses have begun to expand their credit lines while keeping their utilization rates down. Through a combination of the increase in credit availability and small gains in balances, the average credit utilization for a small business dropped nearly 17 percent from the previous year. “Small business credit conditions continue to improve, and near-term prospects are good.  Delinquencies and bankruptcies have declined in most industries and regions of the country for more than a year. The energy industry is the only exception. There are threats to the positive small business credit outlook, including prospects for rising interest rates and volatile financial markets, but those threats appear modest.” Mark Zandi, Chief Economist Moody's Analytics   Other Q1 2016 findings: Despite a strong economic performance relative to the rest of the country over the past several years, bankruptcy rates were elevated in the Southwest and the West Delinquency rates for the retail industry ticked up slightly during the first quarter of 2016 as a result of weak retail sales The top three states with the highest average business credit score* were Vermont (62.6), North Dakota (61.8) and South Dakota (61.7) Download Main Street Report

Analysis highlights credit characteristics, industry preferences and demographic attributes of business owners As part of its analytical series on small businesses, Experian®, the leading global information services company, today announced new insights that look at the health of minority-owned small businesses in the U.S.. “Given that minority-owned small businesses make up such a small percentage of the general small business population (approximately 21 percent), industry professionals and regulators are increasingly becoming more interested in helping this segment grow and succeed,” said Pete Bolin, director of consulting and analytics for Experian. “A primary component to accomplish that objective is to educate small business owners on the importance of maintaining a positive credit profile. For example, keeping debt levels low and paying bills in a timely manner can help small business owners better position themselves for growth opportunities.” Findings from the study show that, compared with the overall small business population, minority businesses are slightly behind when ti comes to credit management. For example, the average business credit score* for a minority-owned small business is 49.7, nearly 5 points lower than the general small business population. As a consumer, the average credit score for a minority small business owner is 707, 15 points lower than the overall average of small business owners. In terms of payment behavior, 1.2 percent of minority small business owners had at least one business credit card account severely delinquent (91-plus days), while 8.3 percent had at least one consumer credit card account severely delinquent (90-plus days). Comparatively, 1.1 percent of the general small business owner population had at least one business credit card account severely delinquent, and 6.8 percent had at least one severely delinquent consumer account. Most popular business types Experian’s analysis also identified the most popular industries for minority-owned businesses. The analysis showed that the industry of choice was eating places, which accounted for 7.3 percent of minority-owned businesses, followed by beauty shops (5.8 percent), legal services (2.9 percent), business services (2.7 percent) and real estate (2.5 percent). Regardless of industry, the analysis found that the average consumer income for these business owners was $92,489, which is similar to the general small business owner population which has an average consumer income of $92,338. From an education perspective, 65.6 percent of minority small business owners had at least some college experience, just slightly less than 68.3 percent for the general business population. “Gaining insight into the trends and behaviors of the small-business community is imperative given their importance to the growth and success on our overall economy,” continued Bolin. “While a person’s ethnicity will never be used in a credit decision, understanding the trends of minority-owned small businesses enables credit grantors to help these business owners find the appropriate lending products to expand their establishments and succeed.” Other findings include:   Approximately 7 percent of all minority-owned businesses are based out of the home, while more than 10 percent of the general small business population is home-based More than 31 percent of minority business owners are women Nearly 45 percent of all minority-owned small businesses come from three states: California (23.4 percent); Florida (11.4 percent); Texas (10.1 percent) Minority business owners have an average outstanding business balance of $8,759, while the general business owner population has an average outstanding balance of $9,066   Resources for business owners Understanding and monitoring their business credit profile to ensure it is in good standing is a critical step for small-business owners to gain access to financial capital and grow their establishments.  With the insights that business credit reports provide, small-business owners can take the appropriate actions necessary to positively impact their business. Experian provides some helpful resources to help small-business owners gauge the health of their business, including: BusinessCreditFacts.com - an authorative source for understanding and learning about the benefits of managing business credit. Visit https://www.businesscreditfacts.com. Experian Business Credit - a site that enables small-business owners to access a copy of their business credit report and helps them understand the impact maintaining a positive credit profile can have on a small business. Visit https://www.experian.com/businesscreditreport.  Business Score Planner™ -  an educational tool for business owners to understand how financial plans and changes to commercial credit information can impact a business credit score. Visit https://sbcr.experian.com/scoreplanner.   Methodology The analysis is based on a statistically relevant sampling of data from Experian’s consumer and business credit database from December 2015. Average scores are an average of the sample, and are not representative of national averages of the consumer or small business. Ethnic background was obtained from Ethnic Technologies, a provider of multicultural marketing data, ethnic identification software and ethnic data appending services.    

According to the U.S. Small Business Administration (SBA), small businesses account for 99.7 percent of U.S. employer firms and 64 percent of new private-sector jobs. So it stands to reason that the way small businesses go, the economy probably follows suit. One of the biggest challenges for small businesses, however, is the ability to access capital. In order for them to grow, they need money. Many of these smaller firms have limited to no credit history on file. For that reason, it is imperative for lenders and trade creditors to leverage comprehensive data sources (both financial and non-financial), enabling them to make smarter business decisions and help small businesses access credit. It is Experian’s core belief that an open and secure data sharing program is crucial to helping small businesses get the credit they deserve, and it's Small Business Credit Share® program is at the center of this ideal. Small Business Credit Share℠ is a Credit Data Sharing "Club" Small Business Credit Share℠ (SBCS) is a consortium of banks, credit card companies, leasing agencies and other companies that have agreed to provide financial and non-financial data in exchange for exclusive access to data from other contributors. By gaining access to this database, lenders and trade creditors can make more informed decisions, while also promoting financial inclusion and spurring growth within the small business segment. Currently, six of the nation's top ten financial institutions are members, as well as several telecommunications and utilities companies. Small Business Credit Share℠ offers more aggregates (data elements) than any other service of its type. Whereas many lenders rely primarily on summary data (e.g., a credit score and reports of missed payments over the past year), Small Business Credit Share reports include a vast array of detailed credit, financial and non-financial data. As a requirement of membership, members must contribute at least 10 pieces of data on each small business account, such as account types, highest credit utilized, total account balance and payment history profiles. Together, these aggregates provide a much deeper, more meaningful view of a small business than was ever possible when drawing from just a handful of sources. They have also proven to be a far more accurate predictor of credit risk than any other service Membership Provides Benefits to Financial Institutions and Borrowers Alike Small Business Credit Share℠ provides significant benefits to member institutions as well as to the customers they serve. For example, Small Business Credit Share allows members to see the obligations an applicant already has to other lenders. With this knowledge, a lender can make sure an applicant does not become overextended and thus jeopardize their ability to pay back the loans already outstanding. A lender can also generate reports that, when shared with a customer, help ensure that paying back that lender becomes a priority so as to strengthen their credit score. Small Business Credit Share can also help members achieve SBA compliance, as the SBA mandates reporting to "bureaus" for all SBA-backed loans (SOP 50 57). To Get More, Give More As in life, what you can get out of the Small Business Credit Share℠ tends to be directly proportional to what you put into it. The more data members share, the clearer the picture of their small business borrowers becomes, and the smarter credit decisions they are able to make. Watch our Small Business Credit Share Program Overview Video We're encouraged by the overwhelmingly positive reception the Small Business Credit Share has received from the financial industry as a whole and from our member companies in particular. We remain committed to the idea that financial inclusion provides a strong value proposition to the Financial Services community, and believe Small Business Credit Share aligns with that ideal. Small Business Credit Share

Businesses are faced with the need to collect on delinquent accounts. When pursuing these past-due accounts, the most successful way to approach them is with a combination of perseverance, politeness, and professionalism. This serves the dual purpose of increasing the likelihood of receiving a prompt payment and also staying within the guidelines set forth by the Fair Debt Collections Practices Act. Perseverance While constantly calling a customer for payment can be a drag, perseverance will pay off—literally. Keep notes when calling the customer, detailing when you called, the time you called and if the customer promised payment. If payment was promised, make a note of when. Most software will have note-taking capabilities, so use that to keep track of whether the customer is following through with payments or not. Aim to call once a week to keep your company in the forefront of the customer's payable person. Politeness Being polite can be trying when the customer is being evasive about payment status. Remember the old adage of catching more flies with honey than vinegar. Being polite gives the customer less reason to avoid payment. Share a story or joke with them. Get familiar with the person doing the payments for your business. Avoid negative outbursts containing vulgar language or calling multiple times per day, which are both violations of FDCPA code. Professional Above all, remain professional. Do not allow emotion or personal feelings about the customer cloud your attitude. This is strictly business, and the customer who may be slow or evading payment would do the same to anyone else in your position. Talk to them about payment plans if they are having a hard time paying. If they are hesitant to pay, ask for the reason why. Is there an issue with the product or service your company offers? If there is a problem with the product, talk to product/servicesupport staff to see if they are aware of this issue. If they are, ask them to contact the client with the solution. Sometimes it is necessary to involve sales representatives while collecting. The sales rep can go in and play "Good Cop," letting the customer know that they would love to sell them more product or further service, but that there's a problem with the account that needs to be resolved with the customer's accounts payable department. This normally results in the procurement associate contacting the accounts payable department and asking why payment has not been made on the prior purchase. Thisfacilitate payment, and in turn, increase company cash flow. Using these techniques will reflect respect and courtesy, which in turn elicits goodwill with the customer. Business Chat | LIVE - Credit & Collections with Katie Keitch We had a great interview about best practices in B2B Collection with Katie Keich. Katie is the V.P. of Commercial Services at InsideARM. She shares how to drive a successful collections strategy in your credit department or through 3rd party collections. Learn more about InsideARM

Simply put, online marketplace lending is here to stay. Virtually unheard of just 10 years ago, Web-based companies that offer funding options beyond traditional bank loans have grown considerably. Small businesses — drawn by the easy application process and flexible repayment terms, have become increasingly comfortable working with online lenders, which offer rapid access to capital, a wide array of niche products, and a low-friction customer experience.  The lack of regulation and higher-than-market interest rates that often accompany these “alternative” loans have not deterred borrowers from trying this new source of business financing. Despite their growth, however, online lenders still make up only a small segment of the overall small-business loan market. While that paints a clear picture of the current online marketplace lending environment, what does the future hold? How is the industry, still in its infancy, likely to change as it responds to pressures from competitors, borrowers and regulators? Here are some trends we can expect to see over the next several years: Growth — As online lending becomes more mainstream, look for the industry to expand exponentially. In 2014, online lenders combined to issue loans totaling about $12 billion in the United States. In a recent report, Morgan Stanley said it expects the U.S. number to grow to $122 billion by 2020 and the global number to surpass $280 billion in the same time period. "Online marketplace lenders are still very small players relative to the overall market, but they’re growing fast. They could be very disruptive or an entirely new [source] of capital for both small businesses and consumers that aren’t necessarily serviced by larger banks.” James Francis Executive Vice President, Consumer Lending Group MUFG Union Bank N.A Participation — Exponential growth likely will be fueled by the growing acceptance of online lending by small businesses, especially those run by millennials comfortable with virtual transactions. As the customer base grows, look for competition to increase as both new and established lenders fight for the attention of this attractive market segment. "Small-business owners in general are increasingly turning to online options to seek capital. According to a recent study by the Fed, 20 percent of small-business owners sought a business loan online during the first half of 2014. Small businesses are using new technologies to manage their customers, process payments, handle point-of-sale — it makes sense they’d turn online for capital as well.” James Hobson Chief Operating Officer OnDeck   Innovation — New, even more, efficient ways for borrowers to secure business loans — not to mention the nature of the financial products themselves — will continue to appear as competition drives innovation. Look for lenders to develop: Faster, more user-friendly interfaces along with algorithms that further accelerate the review and approval process Frictionless access Improved customer engagement and experience Platform and product innovation "Certainly there are more players in the space today, which is great because it pushes not only us but the category as a whole to generate more awareness, more credibility and better platforms to help small businesses. The category as a whole has been built on this idea of making things a little bit more simple and easy. We’re always asking, ‘How can we provide our offerings in a frictionless way and time-sensitive manner?” Jason Rockman Vice President, Brand Marketing CAN Capital   "There are a lot of lenders offering similar products to the same customers. There will be more competition to offer more products, which is better for borrowers.” Meredith Wood Editor-in-Chief Fundera   Consolidation — Industries often go through a period of hyper expansion followed by a period of consolidation as larger, better-financed players acquire smaller competitors and underperformers go out of business. One hundred years ago, more than 100 companies were making automobiles in the United States alone. Today, there are fewer than a half dozen. Twenty-five years ago, scores of companies were making personal computers. Today, a handful of brands dominate 90 percent of the market. We can expect the online marketplace lending sector to experience similar consolidation. Spillover — As online lending becomes increasingly mainstream, look for traditional lenders — particularly commercial banks — to enter the fray. Some forward-looking banks already are working directly with online marketplace lenders, referring customers based on their needs and qualifications or re-creating the frictionless look and feel of online lenders. Look for the dramatic differences between “traditional” and “alternative” lenders to blur in the coming years. "There are several key reasons why banks would want to partner with online lenders. The first is to drive customer retention. A bank says yes to small-business borrowers roughly 20 percent of the time based on their lending criteria. What happens to the other 80 percent? Banks don’t want to lose those customers. Partnering with marketplace lenders is one way to retain those customers and create a good user experience. “Customer loyalty is another driver. Access to capital does more to build loyalty than any other product or service. Finally, the biggest motivator is access to new technology and data, especially for institutions forward-thinking enough to recognize that there are opportunities for them to monetize their existing data as well as learn from the data analysis and data science that some of the more sophisticated marketplace players are executing.” Glenn Goldman CEO, Credibly Regulation — Regulation is on the horizon for the online lending industry. While the absence of regulation has facilitated rapid growth and innovation, this lack of oversight also has led to an environment in which some borrowers have complained of unfair lending practices and a lack of transparency. Most leading online lenders believe some kind of regulation is good for the industry. A set of rules and standards defines the playing field and provides the confidence and consistency the industry needs to grow sustainably. “Some government oversight is going to happen. It’s just a matter of time,” said Levi King, Founder and CEO of Nav (formerly Creditera), which was founded in 2012. “Small businesses are not sophisticated. There’s a lot of predatory lending extended to small-business owners, who are, as a rule, not sophisticated enough to know what’s happening.” “We believe it’s important to foster greater transparency in business lending marketing,” said Rebecca Shapiro, Director, Brand & Strategy, Funding Circle. Along with Fundera, Lending Club, Opportunity Fund and Accion, Funding Circle recently helped craft the Online Borrowers Bill of Rights, which attempts to establish ethical standards the industry can use to police itself. “We don’t assume the bill can replace government regulations. We do believe that, by encouraging responsible regulations, we’ll have a model for what the government should do,” said Shapiro. The Future Is Bright Customer engagement, access, frictionless applications, and a wide range of product choices are at the heart of the online marketplace lending industry. The mainstream banking industry is starting to take note, looking externally at possibilities for collaboration and internally at ways of updating systems and processes to improve the customer experience. Ethical standards and regulations will increase transparency, accountability, and consistency. If these trends continue, both the small-business owner and the economy will reap the benefits. The State of Marketplace Lending In 2008, a short two years after the first online marketplace lenders opened for business, the Great Recession began to wreak havoc on worldwide financial markets. Small businesses struggled to survive, banks failed and access to capital was limited. More online lenders saw an opportunity and opend for business. These technology-driven newcomers hired an army of data scientists, coders and digital marketers. In the fall of 2015 the innovation, industry disruption and regulatory uncertainty that characterize this dynamic sector led Experian to produce a series of articles focusing on different aspects of online marketplace lending. This report contains those articles.   Download eBook Related articles Just how alternative are today’s online marketplace lenders? How online marketplace lenders are changing the rules of small-business finance Self-Regulatory Program for Nonbank Small Business Lenders Top regulatory priorities for commercial lenders Playing to Your Strength - Opportunities for Regional Banks to Build Better Lending Portfolios Game Changer - How Marketplace Platforms Are Bringing Financial Institutions Back to Small-Business Lending Marketplace Matchmakers - How Loan Aggregators Bring Borrowers and Lenders Together New Frontiers - What's Next For Marketplace Lending?

Marketplace lending has become a dynamic source of small-business financing. In 2013, marketplace lenders funded customers to the tune of about $3 billion, twice the volume from the previous year. These numbers are expected to continue to rise steeply throughout the rest of the decade as customers become increasingly comfortable with the concept. Operating almost exclusively via the Internet, thesefintech companies can be particularly helpful to newer, less-established retailers, such as restaurants and B2B service companies that don’t have the documented track record that most traditional banks prefer. These alternate financing sources also can be an excellent resource for smaller loans in the $5,000 to $200,000 range. Larger banks often are reluctant to consider smaller business loans. Business owners looking for quick access to capital have a wide variety of sources to choose from: Nonprofit lenders Invoice financing Online business loans Loan aggregators Peer-to-peer financing Crowdfunding But how can potential borrowers locate these new lenders? When it comes to matching small-business borrowers to the most appropriate lenders, a new breed of marketplace matchmaker or loan aggregator is finding success bringing the two parties together. Aggregators compare the needs and qualifications of borrowers with lenders in their network matching their target criteria. Think of it as speed dating for business financing. Organic Online Searches Not surprisingly, many online lenders rely on technology to find potential customers. Common online marketing tactics include pay per click and search engine optimization (SEO). “Most of our customers come from the Internet itself,” confirmed Meredith Wood, Editor in Chief of Fundera, an aggregator for about 30 individual marketplace lenders. Founded in early 2014, Fundera has helped more than 1,200 small businesses acquire loans totaling more than $60 million this year. “We do paid acquisition and also use content to generate organic searches. We rank well for competitive terms like ‘business loans.’” Nav (formerly Creditera), founded in 2012, is another successful fintech company, offering an array of commercial financial services, including credit cards, credit card processing and small-business loans. Like Fundera, Nav relies on SEO for many of its leads. “Of all the lead channels we have, SEO organic is the most difficult to get going,” said Levi King, Founder and CEO of Nav. “You’re competing for attention with millions of other people. But while it’s the slowest channel, it also tends to yield leads of super high quality. The people who find us organically are looking for what we offer.” Social Media Social media is one tool being used more frequently in Web-based marketing. Using advanced algorithms, marketplace lenders can target ads directly at businesses that fit a specific profile. “We use Facebook, Twitter, LinkedIn — anywhere small businesses are showing up and you can target them effectively,” King explained. “Small-business owners behave a lot like consumers. Their business and personal communications are almost identical. While social media is a great way to connect with this market, it’s definitely not the way you’d market to enterprises.” Referrals Referrals are another significant and valuable source of customer leads and tend to come from one of two principal sources: Other funding sources — Often, a lender, such as a bank, that is unable or unwilling to write a loan for a small business will refer that business to an alternative lender with more flexible requirements. Banks generally refer customers only to companies they have worked with before and have established credibility in terms of reputation, integrity and professionalism. Lenders that make referrals under these circumstances usually do so as a courtesy and receive no fee or other consideration for their efforts. Their intent is to cultivate good relationships with customers who may someday migrate to more traditional banking services. Satisfied customers — Perhaps the most valuable referrals are those that come from other business owners who already have received loans from a particular marketplace lender. Getting referrals from friends, relatives and business acquaintances sets a customer’s mind at ease and helps the customer overcome the hesitation and anxiety sometimes associated with dealing with a new company. Partnerships and Aggregators Many marketplace lenders have developed formal partnerships with companies or with other lenders that provide them with customer referrals. Unlike the casual referrals discussed above, these often involve fees or other consideration as part of a contracted business arrangement. For example, Fundera works with FTD® to help their florists find financing. “Borrowers complete one aggregated application that we send off to various lenders,” said Wood. “We present the offers we receive to the borrowers and work through them together so they understand what each offer means, what they really cost, etc.” The Future of Online Lending Not surprisingly, both Wood and King are bullish on the future of marketplace lending. Wood in particular sees the option as being very attractive to young people who have some experience in the business world and now are ready to start companies of their own. The online marketplace lending industry is growing by leaps and bounds. Fintech companies continue to rapidly innovate, developing niche products and efficient data-driven marketing approaches. At the same time, the banking sector remains the dominant source of funding for small businesses, with close community ties and deep customer relationships. Fintechs and banks are beginning to explore ways to work together to make the most of what each brings to the small-business funding market. Regulators are engaging with the online marketplace lending industry and considering factors related to disclosure, transparency and lending practices. The outcome for small businesses is increased choice, information and access. That is good news for them and for the economy. The State of Marketplace Lending In 2008, a short two years after the first online marketplace lenders opened for business, the Great Recession began to wreak havoc on worldwide financial markets. Small businesses struggled to survive, banks failed and access to capital was limited. More online lenders saw an opportunity and opend for business. These technology-driven newcomers hired an army of data scientists, coders and digital marketers. In the fall of 2015 the innovation, industry disruption and regulatory uncertainty that characterize this dynamic sector led Experian to produce a series of articles focusing on different aspects of online marketplace lending. This report contains those articles.   Download eBook   Related articles Just how alternative are today’s online marketplace lenders? How online marketplace lenders are changing the rules of small-business finance Self-Regulatory Program for Nonbank Small Business Lenders Top regulatory priorities for commercial lenders Playing to Your Strength - Opportunities for Regional Banks to Build Better Lending Portfolios Game Changer - How Marketplace Platforms Are Bringing Financial Institutions Back to Small-Business Lending Marketplace Matchmakers - How Loan Aggregators Bring Borrowers and Lenders Together New Frontiers - What's Next For Marketplace Lending?