Freshly Funded, Finicity’s Lending Focus (SMBs’, Too)

Online Lending

SMBs can make the case beyond static financials, says Nick Thomas, president and cofounder of Finicity. Transaction and account data is ubiquitous, but piecemeal. And bringing that data together, with some level of insight to make lending decisions easier for financial firms, can be a tall order. Lack of insight breeds caution. Caution rarely frees up capital, and would-be SMB borrowers can suffer as a result.

Earlier this month, Finicity, which offers up financial data aggregation, said that it had closed $42 million in a funding round led by Experian, along with existing investors. As Finicity delivers data that stretches across accounts, transaction histories and statement presentations and lets account owners grant permission to financial firms to access that data, the goal is to get better decision-making in place for individuals and business owners — and the financial firms that lend to them.

In an interview with PYMNTS, Nick Thomas, cofounder of Finicity, said that the funding will go at least in part toward boosting headcount across operations that work with the firm’s API offerings and with data services. Those functions serve both individuals and SMBs.

“A small business,” he said, “looks a lot like an individual,” as financial data is presented to a would-be lender. There’s the history of income and outflows and “a snapshot in time” of the financial position via the balance sheet. But for a small business, continued the executive, the need for audited financials may further extend the lending process and the length of time it takes to get a loan.

The ability to tap into what amounts to real-time financial data, he said, is better for lenders and better for the SMB owner. In the case of the latter, he offered, given the static financial data that is the hallmark of the traditional lending process, borrowers might be able to show “better cash flow more recently, if the historicals have not been as good,” comparatively speaking.

Relying on traditional credit scoring, he added, relies on data that lenders report to bureaus and that is sold back to the lenders. But in the case of data that is shared via permission of the users themselves, there’s a level of trust that builds up. One byproduct here as well: The loan process becomes one that avoids the mire of paper-based processes. Thomas told PYMNTS that the firm also is boosting efforts on income and asset verification, which also improves the speed of getting loans to borrowers.