LexisNexis Risk Solution, a data and analytics company that helps loaners assess the risk of small business lending to borrowers, is teaming up with Cortera to add its trade credit analytics capabilities into the mix.
Cortera aggregates B2B trade credit data that includes information on outstanding invoices and payment practices, including whether a payment is overdue.
According to Cortera and LexisNexis, trade credit is especially common in the manufacturing, building suppliers, transportation, logistics, food and beverages, equipment leasing, and other key verticals.
As part of LexisNexis Risk Solutions’ “Ask the Small Business Experts” series, Head of Small Business Risk Management Ben Cutler interviewed Cortera CEO Jim Swift about the role trade credit data plays in risk assessment.
“Insight from B2B trade credit relationships, or trade payment performance history, provides lenders with information on how small businesses interact with their suppliers in terms of their purchase and payment behavior,” explained Swift. “Rather than credit supplied by a financial institution, such as a bank, B2B trade credit is provided by trade partners that invoice their customers and get paid on terms such as ‘net 30 days.’
“In comparison to credit from a bank,” he continued, “such as a credit card bill, small businesses often have many more trade credit relationships with their suppliers than bank relationships. This gives lenders a much deeper insight into small business purchases and payment histories and therefore a more informed sense of its creditworthiness.”