FAQ on PayNet and the Small Business Credit Market

What is a small business credit score?

As with individual borrowers, commercial lenders rely on credit scores to evaluate the risk and reward of making small business loans. Small business credit scores can be derived from multiple data channels, including financial reports, payment history for loans and leases, and default history.

How can a small business get a loan?

Small businesses have a variety of options to secure funding for operating capital and equipment. Banks, commercial finance, and equipment leasing firms are traditional sources, but a crop of alternative financing lenders has emerged to support the private company borrowing market, typically offering online interfaces and faster decisions. PayNet helps all of these types of small business lenders improve their decision-making processes.

How does credit score affect the ability to get a business loan?

Simply stated, a higher credit score will improve a small business’ chances of getting favorable loan terms, or a loan at all. Lower scores mean a higher risk of non-payment or default, so commercial lenders who are willing to maintain a higher-risk portfolio will demand higher interest rates to offset the chance of default. PayNet provides data-driven scoring to improve the chances that the credit score value will provide a realistic indicator of future loan performance.

How can I find more information about a private company’s credit history?

PayNet’s database of over 25 million small business loans in the U.S. and Canada provides real-time access to key performance indicators for significant proportions of potential borrowers. We even help you identify borrowers who may not be paying you while they are paying other lenders.

How can we administer credit and loans more efficiently?

Greater efficiency in credit administration pays off in more loyal and profitable customers. Using artificial intelligence (AI), credit data modeling best practices, integrated credit data, and streamlined workflows increases your efficiency. PayNet provides both the information and insights to help you integrate and improve results through data-driven decisions.

How do I know when a business’s financial strength is weakening?

PayNet’s Absolute Probability of Default allows you to look out over the next eight quarters at each borrower in your portfolio to more accurately measure their financial performance and risk profile. It’s part of our portfolio management tools that help you address the complex, time consuming process of assessing risk ratings across your balance sheet.

How can commercial lenders make it easier for small businesses to apply for loans?

A digital lending transformation is underway, meaning that private and small business borrowers have increased choices among commercial lending providers. They will be seeking partners who can respond to applications more quickly with less cumbersome requirements for documentation. PayNet’s loan performance database gives lenders an edge in quickly assessing the borrower’s risk profile, speeding up the decisioning process and saving operational costs.

How can I manage my commercial lending portfolio better?

Managing your commercial lending portfolio for more profitability requires both granular metrics regarding individual borrowers and an understanding of the environmental economic conditions that may impact their ability to meet terms. PayNet does it all for you, with speed and precision.

How can I identify markets that are underperforming?

A great source to answer questions about small business market lending activity and loan performance is PayNet’s Risk Insight Suite, which delivers data-rich insights on the private lending market. On a localized level, we offer a suite of portfolio management tools to help you predict risk of default within your current asset base.

How can I identify new lending market opportunities?

PayNet’s quarterly report, the Small Business Credit Outlook, summarizes opportunity areas highlighted in its Risk Insight Suite, segmented by both industry and geographic area. You can review market dynamics and risk outlooks at a national, state, and local level.

How can I make better business lending decisions?

Better data means better decisions. PayNet offers unparalleled access to commercial credit history reports and scoring strategies based on timely and relevant loan and lease activity.

How can we protect ourselves from unforeseen losses?

Prevention is the best cure when it comes to small business loan defaults. Making more informed credit decisions in the first place pays off in lower risk, as does continuously managing your portfolio to analyze borrowers’ probability of default, well before it may become obvious.

What is an "early warning system" for loan defaults?

Automated account review supported by PayNet’s Absolute Probability of Default^TM helps you anticipate and address credit "hot spots" before they happen. This gives you advanced warning and notification of accounts that are likely to become delinquent, allowing you to focus your staff’s time and energy on those borrowers.

What information is available in PayNet’s Risk Insight Suite®?

The PayNet Risk Insight Suite® (RIS) provides invaluable information and resources that help you make profitable decisions. RIS provides intelligence that you can't find anywhere else. You’ll get up-to-date information on credit conditions, lending activity, and loan performance across the country, including:

- Loan default forecasts

- Downloadable national historical data

- Monthly commercial credit conditions reports

- Exportable customizable charts and graphs

- Quarterly Small Business Credit Outlook

What is the Small Business Lending Index (SBDI) and how does it affect my business?

PayNet’s Small Business Lending Index (SBDI) measures the volume of new commercial loans and leases to small businesses. It supports granular analysis of lending activity through more than 900 state and industry indices to pinpoint inflection points in the business cycle and changes in performance of financial assets.

What are the Small Business Delinquency Index (SBDI) and Small Business Default Index (SBDFI)?

PayNet’s loan performance indices measure small business financial stress and default risk on a monthly basis. The Small Business Delinquency Index (SBDI) tracks late payments for 31-90, 91-180, and 31-180 day periods. The Small Business Default Index (SBDFI) measures the percent of loans and leases that have defaulted in the last 12 months. As leading indicators of macroeconomic trends regarding business cycle inflection points and unemployment changes, these indicators give you big picture insights to inform credit oversight.