Intuit recently unveiled QuickBooks Capital, a new small business lending product that provides users of QuickBooks access to small business loans up to about $35,000. This new service’s lending process is done using algorithms from within QuickBooks itself. Thanks to Intuit’s big data and machine learning techniques, most borrowers will know whether or not they are approved for a loan in just a few minutes. In this article, Steve King, a partner in Emergent Research and a regular contributor to SmallBusiness.com explains how this and other data-driven lenders are helping small businesses access loans.


Lack of credit is consistently one of the top challenges for small businesses. And for new businesses (those that have been in business less than 5 years), the challenges are even greater. According to the Federal Reserve of New York 2016 Credit Survey: Report on Startup Firms, 70% of young businesses say they need funding to grow. But only 23% of these firms are successful at getting all the funding they are looking for.

70% | Percentage of new businesses say they need funding to grow
26% | Don’t apply
21% | Get rejected
30% | Get partially funded
23% | Get funded

Source: 2016 Small Business Credit Survey. Federal Reserve Bank of New York

Insufficient credit history is why young companies find it hard to get funding

Simply put, they haven’t been around long enough to establish a strong enough track record for lenders to be comfortable providing them credit. And even if they get the credit they’re looking for, small business satisfaction with the lending process is not good

Percentage of successful borrowers who are satisfied with their experience at various lending sources

48% | Small banks
31% | Big banks
23% | Online lenders

How Intuit uses anonymous data to approve loan requests

Intuit has over 2 million small businesses that have agreed to allow the software company to analyze anonymized data in an aggregated format to develop products like QuickBooks Capital. This means Intuit can analyze 28 billion data points in its credit model. (QuickBooks users own their data and have to provide Intuit permission to use their data in this manner).

This database of income-statement, balance sheet, cash flow and transactions data allows Intuit to fully analyze the current financial state of a small business and predict its ability to pay back a loan. It also means Intuit’s credit model has enough data to allow them to lend to young small businesses, even those that have been around less than one year.

Based on the service’s beta customers, this approach is broadening credit availability and making it easier and quicker to get a loan.

Analysis by Intuit of its early QuickBooks Capital borrowers

46% | Had never applied for a loan before.
60% | Would likely have their loan application rejected elsewhere
90% | Say the loan helped their business grow

istock


Also on SmallBusiness.com

Intuit Provides a Peak at Innovative Ways Small Businesses May Work in the Future

2
Small Business Lender Kabbage Receives $250 Million Equity Investment | 2017

The marketplace lender plans to use the investment to expand its lending products for small businesses and will explore non-lending products and services for these customers.

3
Indiegogo Launches an Equity-Based Crowdfunding Option for Startups | 2016

Indiegogo steps into equity-raising crowd-funding financing but it’s not going to be for everyone.

4
An Overview of Small Business Alternative Financing | 2016

The SBA Office of Advocacy publishes a new “alternative financing” issue report.

5
Treasury Department Considering More Oversight of Online Small Business Loans | 2016

The U.S. Treasury Department is considering intensifying oversight of small business online loans.

6
Online Lenders and the Terrible, Horrible, No Good, Very Bad Few Days

During the past few days, the marketplace lending industry has been battered by controversy and negative news.

7
Online Small Business Lenders Unveil New Trade Association, Tools For Transparency in Fees, Costs | 2016

The fast growing industry is responding to complaints about transparency of fees.

8
Treasury Department Studying Small Business Alternative Lending | 2015

U.S. Treasury Department is studying the fast-growing online marketplace lending industry.

9
SEC Finally Issues Rules for Small Business ‘Mini IPOs’

The Securities and Exchange Commission (SEC) has adopted final rules to facilitate smaller companies’ access to capital that were mandated by Title IV of the Jumpstart Our Business Startups (JOBS) Act.

10
Answering the Riddle: Are Banks Not Lending to Small Businesses, or Are Small Businesses Not Borrowing from Banks? | 2015

Small businesses are reporting their lending needs are being met, yet banks are lending to small businesses less than before 2008. Why?

11
Small Business Lender OnDeck Capital Steps Up to Bat, Hits IPO Homerun | 2014

OnDeck Capital, which makes loans to small businesses, rallied more than 30 percent on its first day of trading.

12
How the Credit Crisis and Recession Changed Small Business Lending Permanently | 2014

The difficulty many small businesses have had in securing traditional bank debt has led to non-bank, internet-enabled lending alternatives that will change the landscape of small business lending well into the future.

13
Small Business Lender OnDeck Capital Preparing IPO | 2014

Small business lender OnDeck Capital Inc. is preparing to file for an initial public offering that could value the business at roughly $1.5 billion.

14
SmallBusiness.com Introduction to Peer-to-Peer Lending | 2014

New internet-powered models of business lending match up individuals who want to borrow with those who have funds to lend (at higher interest rates than alternative investments).

15
SmallBusiness.com’s Introduction to Crowdfunding | 2014

An introduction to various ways of funding a business project–or the business itself–by combining small amounts of money contributed by each individual in a large group.