B2B Payments

Running A Background Check For Businesses

A key challenge for alternative lenders in the small business lending sector is the ability to adequately vet and assess potential borrowers. Mitigating risk for SMEs has become more than simply assessing a credit score, and players are turning to other sources of information to see whether applicants are the right fit.

Yesterday (Aug. 25), U.K.-based business information firm Equifax launched a new platform to help financial institutions and small business alternative lenders to gain the data they need to assess a borrower’s risk.

According to an announcement, Equifax Business Insights will offer both institutional and alternative lenders, including invoice and trade financers, real-time data sourced from data providers.

These sources include Companies House and other third-party providers, such as legal documents, commercial agreement payments, credit scores and credit limits, among others. The service also verifies business ownership and conducts an anti-money laundering review. Together, Equifax said this array of information provides a well-rounded view of potential borrowers.

The information can also be used for non-lending purposes, Equifax added. For example, small businesses — like suppliers — that work with business customers can use the database to assess potential clients to mitigate risk.

But for Equifax Business Information Head Nic Beishon, the service will be particularly useful to SME lenders. “Increasing lending to smaller businesses is an important step in the U.K.’s economic recovery, but the SME sector has notoriously been one of the most challenging to underwrite and lend to securely,” Beishon said in a statement.

He added that players often assume that the data on SMEs and their owners either doesn’t exist or is difficult to find, meaning many believe they must move forward with a new business client blindly. “However,” Beishon said, “this information is likely to be available, and our solution is designed to provide access to it.”

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