Streamlining Data is the Key to Expanding Access to Capital

Lenders who service small and medium businesses know that access to capital is top of mind: on average, 80% of them need it once a year. Delivering capital is low-hanging fruit for them, beneficial both for businesses intent on scaling and themselves: the benefactors of the spend.

Now, a few months removed from the Money20/20 conference, I’ve had more time to reflect on the optimism in the market right now. It’s palpable. Coming off of the challenging and complex last two years, there are lots of investments underway, further proof of the inertia building towards a breakout year in 2025.

But for this momentum to be equitable to all parties, we must look to data.

Moving Beyond Grow-at-all-Cost to a Strategic Growth Mindset

It’s hard to believe that we’re now five years removed from the beginnings of the global pandemic, which had a particularly unique and devastating impact on small and medium businesses.

During that time and through the introduction of the Paycheck Protection Program (PPP), the cost of capital was free – yet unrealistic. Of the estimated 11,338,996 loans totaling $785,773,859,100, over 70,000 were potentially fraudulent, and many were awarded to businesses that did not need the capital infusion. In the aftermath, a grow-at-all-costs environment emerged, sending earning rates through the roof, resulting in a few correcting years where these businesses struggled to get financing. Now on the other side, many small and medium businesses have put themselves in a better position by shifting to a more managed and strategic growth mindset, and lenders are taking note.

Open Banking and Streamlined Partnerships Take Center Stage

There are many factors at play with the loosening of the purse strings, but the fact remains that traditional finance still leaves small and medium businesses behind. Lendio’s recent survey shows that while most SMBs’ access to capital is met, their perception of capital availability is less favorable than that of lenders: 38% of SMBs responded that access to capital was below market averages, compared to 29% of lenders.

For lenders, challenging that perception will be a critical task in the months ahead, and collaborating with trusted industry partners will help. Lendio (in partnership with Mastercard) has been evaluating bank/cash flow data for over a decade. Now our two SaaS platforms, Embedded Loan Marketplace and Intelligent Lending, are one example of how lending partners and banks can streamline their access to SMB data by integrating technology into their existing platforms.

For small and medium businesses, open banking is the key—a powerful opportunity to leverage their bank transaction data to apply for a business loan, thereby accelerating the application and decision-making process. Bank data is critical because it cannot be altered or manipulated, so lenders can accurately assess the SMB’s cash flow and financial health.

Fortunately, banks are now beginning to appreciate the power of this transaction data—a current, real-time view of the business’s health. It’s good news for small and medium businesses, too: a recent PYMNTS Intelligence report affirmed that 72% of small businesses using embedded lending have access to bigger credit lines.

The Future of SMB Lending

Serendipitously, the industry has reached an inflection point where an interconnected ecosystem of financial tools can now help small businesses survive and thrive. This has created a future where SMB lending is “always on,” and entrepreneurs do not need to proactively – and painstakingly – apply for business loans.

With streamlined access to data, lenders can now continuously display the amount the SMB is qualified for and project their future needs with powerful analytics.

If all parties can agree to feed the data, widening the ecosystem for traditionally underserved entrepreneurs can become a relic of the past. I think we can all agree that it would be nice to say goodbye to some unprecedented times for a while.