In 2014 the Subcommittee on Small Businesses and Entrepreneurism published a report that said only 4% of the total dollar amount of business loans go to Women owned businesses. After hearing of this report, Experian Decision Sciences decided to conduct a study of Women Business Owners to see how they were doing. The big "ah ha" moment for us was when we looked at this data and discovered how similar the Men and Women's credit profiles were. The commercial Intelliscore Plus scores were quite similar, the consumer credit scores are very similar, so we wondered why only 4% of small business loans was going to Women. One potential reason why Women might not be getting the credit they deserve on the business side is the credit utilization rate on their consumer credit. Utilization rate is the balance-to-limit ratio, and it tends to be higher for Women owned businesses than it is for Male owned businesses. And that could be a legitimate reason why lenders are perceiving Women owned businesses to be higher risk. Another aspect of our study pertains to the industries Women and Men are working in. Women owned businesses tend to be focused on personal services like beauty shops and child care, while Male owned businesses tend to be focused on industries like general contracting. Why is this important? Because the mix of industries carries different levels of sales amounts. We know that 14.5 percent of Women owned businesses have sales above $500,000 while Male owned businesses have 24 percent that have greater than $500,000 annual sales. It's important for business owners to understand all aspects of their credit, because the more that they understand, the more power they will have when they go in to apply for a loan. We created two Snapshot Infographics for this study which show the differences between Women owned businesses and Male owned businesses.  

Imagine for a moment a young parent who has been laid off from their job. After months of looking for work they still have not found a job. To make ends meet they start doing landscape work for neighbors in the area, eventually jump-starting a landscaping business to provide for their family. With some hard work, they start to build up a clientele in the local neighborhood. While they are starting to get back on their feet slowly, they realize at the current rate, the business will not completely meet the needs of their young family. If they could borrow just $3,000 to buy some more mowers and trimmers, however, they could hire two friends and double the size of the business. With that in mind, let’s assume that they have a mediocre credit score, their credit card has a credit limit of $1,000 and they are maxed out. Furthermore, they don’t own a home to borrow against, and the loan size they are seeking is too small for a bank to even consider. However, if they could get a $3,000 loan, they could expand their business, create two new jobs and better provide for their family. There are folks just like the person described above all across the country looking for help. But where do they turn? Alternative financing options provide an avenue for entrepreneurs and other small business owners looking for commercial funding, who are otherwise turned down from more traditional financial institutions, such as banks and credit unions. By leveraging business credit data from credit bureaus, such as Experian, as well as other data sources, alternative financers are able to make lending decisions and extend credit to this segment of small business owners, enabling them to finance their company’s growth, ultimately stimulating the economy. One example of an alternative financer using such data to help open opportunity for small businesses is Opportunity Fund, a non-profit micro lender in California. Otherwise known as Community Development Financial Institutions, these micro lenders aim to create economic opportunity for underprivileged businesses in the U.S. And the need for these alternative financial institutions in California is critical. Despite recent upticks in our economy nationwide, things are still very tough in the Golden State. New data released by the Corporation for Enterprise Development (CFED) show many Californians are still struggling to gain a foothold in the economic recovery. CFED’s 2015 Assets & Opportunity Scorecard ranked California 50th among all states and the District of Columbia, for its large number (15.8 percent) of underemployed workers, 49th for both its home ownership and housing affordability rates, and dead last (51st) for high school degree attainment. Source: Corporation for Enterprise Development (CFED) Needless to say, there are a number of small business owners in California looking for financing to help grow their business. Organizations like Opportunity Fund help these business owners find affordable funding, and educate them on what they need to know about expanding. How alternative financers are helping? Opportunity Fund CEO, Eric Weaver & Rosa Funes A prime example of how alternative finance options are helping small businesses is the story of Paradise Flowers and Gifts. In Opportunity Fund’s most recent video, CEO Eric Weaver describes first meeting Rosa Funes, and how she described her longtime love of flowers. As a loan officer at the time, Eric described going to Rosa’s home and knocking on her door. She needed $500 to start a flower business. The amount was smaller than they had ever considered, but Eric was so moved by her story and her drive that he looked at her and said “Yes”, and told her “Rosa, you have a dream, don’t stop.” Alternative finance options, like Opportunity Fund are working hard every day to help small business owners and entrepreneurs gain the financial footing they need to succeed. After all, they are the backbone of our economy. The work that Opportunity Fund and other alternative financers have done will create a powerful ripple effect to drive economic opportunity across California, and the rest of the country. It’s the perfect example of how data can be used for the betterment of society and helps these smaller entrepreneurs grow.

Building financial capability and improving access to credit is essential for economic growth in our country. This is especially true for entrepreneurs, many of whom rely on their personal consumer credit standing when applying for a loan for keeping their small businesses strong or for a capital injection to expand their operations. While commercial lending has made a steady increase since the height of the recent economic recession, a recent report from Experian finds that women business owners continue to trail their male counterparts when it comes to commercial and consumer credit scores. Gender gap in access to both commercial and consumer credit The findings make clear that a gender gap exists in both commercial and consumer credit files: The average commercial credit score for a woman-owned business is 34, while the average score for a male-owned business is 35; The average consumer credit score for women business owners is 689, compared to 699 for male business owners; More than 22 percent of male-owned businesses have at least one open commercial trade line, while the same can be said for only 18.5 percent of women-owned businesses; In the last 24 months, female business owners had an average of 1.3 personal accounts become 90-plus days past due, while male business owners had an average of .9 go delinquent. This has a direct and quantifiable impact on the bottom lines for women-owned businesses. For example, Experian’s analysis found that more than 24 percent of male-owned businesses have sales that exceeded $500,000, while only 14.5 percent of women-owned businesses see sales of that size. In addition, 21.2 percent of male business owners have a personal income of $125,000 or greater, compared to just 17.4 percent of women business owners. Policymakers recognize the need to improve credit access for women-owned businesses Developing sound public policy to improve access to credit — especially for women and minority-owned business owners — is a top priority for policymakers in Washington, DC. In July 2014, then-Senate Small Business Committee Chair Maria Cantwell (D-Wash.) released a report, entitled “21st Century Barriers to Women’s Entrepreneurship.” The report took a wide-ranging look at some of the challenges that women face in starting a business. In particular, it found that “$1 of every $23 in conventional small business loans goes to a woman-owned business.” Look for legislative proposals to aide small business owners Look for Congress to continue to discuss policy proposals aimed at increasing access to fair and affordable credit for consumers and small business owners alike. One such proposal that has garnered bipartisan support would make it easier for utilities and telecommunication providers to report positive, on-time credit data to the nation’s credit bureaus. While they have long made pricing decisions based upon the full-file credit data furnished by traditional creditors, like lenders and retailers, telecommunication and utility companies have historically only furnished derogatory data, such as when an account is in collection. Including both positive and negative data from these sources will enable tens of millions of thin-file consumers — and small business owners — with a proven record of meeting monthly financial obligations to access fair and affordable credit. Experian welcomes the opportunity to work with policymakers to help improve access to fair and affordable credit for consumers and small business owners alike. Resources for business owners Understanding and monitoring their company’s business credit profile to ensure it is in good standing is essential for small-business owners to gain access to necessary capital. With the insights that business credit reports provide, small-business owners can take the appropriate actions necessary that will positively impact their business. Experian provides some helpful resources to help small-business owners gauge the health of their business, including: BusinessCreditFacts.com — An authoritative source for understanding and learning about the benefits of managing business credit. Visit http://www.businesscreditfacts.com. Experian Business Credit — A site that enables small-business owners to access a copy of their business credit report as well as understand the impact that maintaining a positive credit profile can have on a small business. Visit https://www.experian.com/businesscreditreport. Business Score Planner™ — An education tool for business owners to understand how financial plans and changes to commercial credit information can impact a business credit score. Visit http://sbcr.experian.com/scoreplanner.  

Ten years ago movie night at our house would usually include a run to the video store where we would pick out a selection from the New Arrivals section, some candy, perhaps some popcorn and we would have our fingers crossed the selection was a good one. Nowadays it’s not uncommon to find us binge watching streamed episodes of “House of Cards” or “Mad Men on weekends.” What’s even more gratifying is after watching “House of Cards” unprompted, Netflix now recommends “The Newsroom” and other shows we invariably like. How do they know we would like these shows? This is predictive marketing at work, driven by big data. Netflix has developed sophisticated propensity models around each member’s viewing habits, and the net result is a better viewing experience with the service. We make amazing entertainment discoveries every week. In business marketing propensity models will determine which prospects or customers are likely to respond to a particular offer. For example, the marketing department of a large financial institution seeking to expand their commercial small business loan portfolio, might want to segment and target commercial lending offers to a concentration of customers most likely to accept a particular offer. When applied in business, propensity models can unlock opportunities for increased profit, share of wallet and deeper engagement with prospects and customers. At Experian, in a typical propensity modeling engagement we will first meet with our customers to understand their goals and objectives. We talk first about pre-screen criteria that enable us to screen out prospects that would not fit into the criteria. A sporting equipment manufacturer would probably not sell to companies in the mining or agriculture industries, so we weed out the ones least likely to lead to a successful conversion. Our data scientists and statisticians get to work on large data sets and evaluate a number of factors. Experian will then develop a customized response model that will identify significant characteristics of responders vs. non responders and therefore will maximally differentiate responders from non responders. Since (holding other factors constant) a higher response rate is preferred, a response model can help lower the cost per response. The response model will generate a “score” that can be used to rank order the prospects base in terms of response likelihood. The response model can be used in two different ways to achieve maximum effectiveness. It can be used to optimize the number of responders for a given sized solicitation, or it may be used to minimize the number of solicitations in order to achieve a budgeted number of responders. A high response score will indicate someone who is likely to respond, as is shown graphically in Exhibits 1 and 2. This work results in a model of the ideal target to which an offer would most likely resonate with. This is called a lookalike. The marketing department at our large financial institution might start off with a large list of potential candidates to send the offer via direct mail, 1 million for example. But mailing an offer to that many people may be cost prohibitive. A propensity model can identify prospects most likely to accept the offer, so your direct mail campaign is more targeted, thereby increasing ROI. A highly targeted mailing to your ideal targets is a safer bet, and would make for a much more predictable outcome. The marketer can feel more confident mailing an offer to lookalike prospects because the chances of successful conversion are that much higher. That’s the case for Woodland Hills based ForwardLine, who have been providing alternative short-term financing to small businesses since 2003. Working with Experian Decision Analytics, ForwardLine did an analysis of their direct marketing program and determined that 22 percent of direct mail was generating 68 percent of their underwriting approvals, exposing a significant gap in wasted marketing funds. The Experian Decision Analytics team developed a custom model which enabled ForwardLine to algorithmically target lookalike prospects with a higher propensity to convert into a successful loan engagement. Michael Carlson, V.P Marketing, ForwardLine ForwardLine Vice President of Marketing, Michael Carlson is thrilled with the initial results. “Working with Experian we were not only able to improve performance, but we are able to reduce our marketing spend, while achieving the same results. We have taken our direct marketing effort from a small program that was profitable, but not meaningful in terms of generating significant volume, to working with Experian to achieve remarkable results. It’s largely why we enjoyed 20 percent growth this year.”     Best in Industry Credit Attributes Experian clients use our archived Biz AttributesSM along with collection specific data elements as independent variables for propensity model development. Experian’s Biz AttributesSM are a set of commercial bureau attribute definitions (includes several key demographic attributes as well) which are accurately developed off Experian’s Commercial BizSourceSM credit bureau. When used for response model development, Biz AttributesSM provides significant performance lift over other credit attributes. Biz AttributesSM are also effective in segmentation, as overlay to scores and policy rules definition, providing greater decisioning accuracy. Additionally, at Experian we are constantly monitoring our growing data warehouse looking for ways to develop new attributes. We live in an ever changing market place which requires us to develop new credit and demographic attributes as well as making enhancements to existing attributes. This process takes a disciplined, rigorous, and comprehensive approach based on experience guided by data intelligence. Our goal is to provide world-class service and the industry’s best practices for modeling attributes. To keep pace with market changes, new attributes are developed as new data elements become available, while raw data elements and existing attributes are monitored and managed following rigorous and comprehensive attribute governance protocols to ensure continued integrity of attributes. If you would like to learn more about propensity models, contact your Experian representative today.

In many cases, business lenders often rely on the commercial credit of the enterprise coupled with the personal credit of the business’s owner when making lending decisions. This is especially true for sole proprietorships and partnerships. To that end, regulatory action and public policy initiatives aimed at consumer credit often times can have a direct impact on commercial lenders. This blog takes a look at some of the top regulatory priorities for business lenders within the credit ecosystem. Ensuring the accuracy of credit data Over the past two years, the Consumer Financial Protection Bureau (CFPB) has taken several actions to make clear that it believes data furnishers — including lenders — are responsible for ensuring the accuracy of the credit data that they report to credit reporting agencies (CRAs). The CFPB issued two bulletins — in September 2013 and February 2014 — reminding data furnishers of their responsibilities under the Fair Credit Reporting Act (FCRA) and the need to properly conduct investigations when a consumer disputes an inaccuracy. The CFPB backed up these bulletins with an August 2014 enforcement action against a lender that it said failed to fix flaws in its software system that were causing it to report inaccurate credit data to the CRAs. Debt collection practices remain in the spotlight Another top focus of regulators that may overlap with small business lending is increased scrutiny of the debt collection market. Within the collections industry, the CFPB has focused on problems related to how information about a debt is transferred from a first party to an outside agency or debt buyer, as well as the standards and timing of when a collections item goes onto a consumer’s credit report. To that end, in December 2014 the CFPB announced that it was requesting the national credit bureaus to provide regular accuracy reports that highlight key risk areas, including disputes, for consumers. The CFPB will use these reports to help prioritize their work on accuracy metrics, including: furnishers and industries with the most overall disputes; and furnishers with high disputes relative to their industry peers. The CFPB also released an Advanced Notice of Proposed Rulemaking (ANPR) in November 2013, covering a wide array of complex issues within the debt collection market. It’s expected that they will release the first version of its proposed rule for the collection market in late 2015 – early 2016. Policies boosting financial inclusion are also critical for business lending Commercial lenders should also pay attention to efforts by policymakers to improve financial access for the more than 60 million American consumers that either have a thin credit history or no credit data at all. In the case of an entrepreneur, a thin or no hit credit file would make it much more difficult to access affordable capital. One way to improve the ability for unbanked individuals to access affordable credit is through the reporting of on-time payments made to utility, telecommunication and rental companies by consumers — often referred to as “alternative credit data.” While they have long made pricing decisions based upon the full-file credit data furnished by creditors, historically telecom and utility companies have only provided negative data — i.e. late payments or if an account is in collection. Including both positive and negative data from these sources will enable tens of millions of thin-file consumers — and small business owners — with a proven record of meeting financial obligations to access fair and affordable credit. The CFPB weighed in on the importance of including alternative data in a 2013 report on financial empowerment. Bipartisan legislation has been introduced the past two sessions of Congress that would clarify federal law to encourage utilities and telecom providers to report positive credit data to the nation’s credit bureaus. Coming soon: CFPB data collection on women and minority owned businesses Small business lenders are also keeping a close eye on the development of the new data collection requirements under the Dodd-Frank Act. Despite the CFPB being primarily focused on consumer lending, the agency was tasked with implementing a provision of the Dodd-Frank Act that required lenders to ask small business applicants if the business was women or minority-owned. The problem is that this question is currently prohibited under Equal Credit Opportunity Act (ECOA), as a creditor cannot inquire about the race, color, religion, ethnicity or sex of an applicant. The CFPB will ultimately have to provide guidance to help resolve the conflict between these two laws. While this new sweeping data collection mandate will not become effective until the CFPB adopts the necessary regulations, it’s easy to see how this could ultimately impact small business lenders. As many have said before, small businesses are the lifeblood of our economy, but they need funds to grow. We’ll want to keep a close eye on each of these initiatives, as the regulatory impact can be huge for small business lenders, and the ability for small businesses to access capital.

At the recent “Future of Data-Driven Innovation” conference, Emery Simon of the Business Software Alliance noted that each day 2.5 quintillion bytes of data is gathered. How much data is that exactly? To put it into tangible terms, if this data was placed on DVD’s, 2.5 quintillion bytes would create a stack tall enough to go from Earth to the Moon. As Experian’s CEO, Craig Boundy recently blogged, at Experian, we have deep experience harnessing the power of data, in fact; we have been doing it since 1897. Using our insights to help merchants and consumers by providing an annual credit reference directory, we were using “Big Data” before it became a buzz word. You can read Craig’s blog post here. But let’s talk for a moment about the economic impact Big Data can have on society. A recent McKinsey report estimates that improved use of data could generate $3 trillion in additional value each year in seven industries. Of this, $1.3 trillion would benefit the United States.     “Improved use of data could generate $3 trillion in additional economic value each year in seven industries.” McKinsey report: Open data; Unlocking innovation and performance with liquid information As consumers, we see the power of Big Data everywhere these days. Local and State governments are using data to tackle policy objectives like kick starting their economies and driving down crime-rates. In health care, Big Data is being used to reduce infant mortality. Researchers analyzing large data sets of vital signs from premature born babies discovered that whenever the vitals seem to stabilize, there is a high probability that a baby will suffer from a dangerous infection just a few hours later. Stable vitals are red flags, and recognizing them enables doctors to treat an infant before the full onset of the infection. And public health agencies are predicting and managing emergencies from the flu to Ebola with big data algorithms. HealthMap.org is an innovative mapping website that uses algorithms to scour tens of thousands of social media sites, local news, government websites, infectious-disease physicians’ social posts, and other sources to detect and track disease outbreaks. When healthcare workers in Guinea started to see patients with Ebola-like symptoms and blogged about their work, a few people on social media mentioned the blog posts. These blog post mentions were picked up by Healthmap. The result, an algorithm using big data told the story of a looming Ebola outbreak nine days before the World Health Organization formally announced the epidemic. Google can predict the spread of the flu, not through mouth swabs or by interviewing doctors, but simply by analyzing billions of search terms they receive from users of their search engine every day. The city of Syracuse, New York wanted to understand why certain neighborhoods declined over time. The city was struggling with abandoned housing, a phenomenon that is often associated with crime, poverty, and health issues. Analyzing local education, social services, economic, real estate, and police data, the city of Syracuse worked with a team of IBM Big Data analysts who demonstrated that certain trends can presage a decline in public safety, property value, and small business growth. Big Data applications in business In 2008 Starbucks CEO, Howard Schultz was forced out of retirement to get the company back on track after closing hundreds of under-performing stores. Starbucks now employs a disciplined data-driven approach to store openings by using Esri’s ArcGIS Online software, a sophisticated mapping platform which blends maps with demographic data. Starbucks can now pinpoint where their new stores should open, where they can be the most successful. Big Data correlations help Amazon and Netflix recommend products to their customers. In automotive manufacturing, predictive maintenance based on Big Data correlations enables companies to predict when a car engine part needs to be exchanged before the part actually breaks. In computer distribution, algorithms which analyze buying trends and payment data from millions of transactions can pinpoint the segment of customers who will soon stop buying. Identifying this cross-section of soon-to-quit customers enables sales organizations to proactively ramp up customer retention strategies to mitigate the risk of lost business. This helps our economy and our businesses thrive. In agriculture, there are companies and universities blending hardware with big data. Apple farmers in the Midwest are using bug traps fitted with sensors that can identify specific types of bugs in the trap. The traps are connected to the Internet in a data portal that the orchard manager can see where an infestation begins and stop it in its tracks. Being able to turn insights into action, farmers can use data analytics on bug infestations to use fewer pesticides, grow their crop more consistently and more profitably. Big data delivers tangible savings to tax payers The U.S. voter registration system is a challenge to manage. List maintenance can be difficult, and the system needs an upgrade. An inaccurate voter registration file can cost the government between $1 and $2 per year. For a state with 5 million voters, this could mean a cost of $0.5 to $2.5 million per year or more in additional costs, depending on the actual condition of the voter file. Orange County, California was able to update more than 297,000 voter records using information from TrueTraceSM, one of Experian’s most powerful data hygiene products. It draws from Experian’s core consumer credit database of more than 220 million consumers and 140 million households, as well as access to 100 million wireless phone numbers. Orange County saved over $44,000 in the first election alone – savings that will grow with each passing election as the county avoids mailing materials to out-of-date addresses. There are a lot of things to be excited about in the realm of Big Data. As Julie Brill, Commissioner of the Federal Trade Commission remarked at the recent Future of Data-Driven Innovation conference, “The data driven economy will not thrive unless the bits of consumer information collected and analyzed are used to benefit the consumer – plowed back into the relationship between businesses and their customers to make it stronger, deeper, and ultimately more profitable.”

Hello, I’m Hiq Lee, president of Experian’s Business Information Services, and I’d like to talk to you about how we are using data for good to help companies, large and small, succeed in the marketplace. At Experian, our group plays a crucial role in the big data ecosystem as an enabler of commerce and insights for the business community at large. We deliver unbiased information on more than 25 million active U.S. businesses, plus our international data capabilities, enable our customers to make more confident decisions on companies overseas. In 2012, along with Moody’s Analytics, we developed the Small Business Credit Index, which provides a unique perspective on the health of small businesses in the United States. The report contains important trends on bankruptcy rates, delinquencies, and overall payment behavior, as well as macro-economic information. This deeper look at the business landscape helps financial institutions and businesses every day to make sound lending decisions, gain key insights on business credit health and prospect for the right customer. At Experian, we are committed to delivering quality data and are strategically focused on the innovation of new and advanced products and services that enable businesses to thrive. Whether it’s analyzing millions of business credit transactions to generate industry-leading commercial credit scores and business credit reports, or safeguarding and securing millions of records to protect businesses and their customers from fraud, Experian is at the forefront of big data, driving value for our customers the world over. For Experian’s Business Information Services, using our data for good means constantly innovating and looking for ways to benefit businesses, as well as consumers and the overall economy. Related Data Is Good - Analytics Make It Great - Craig Boundy, CEO  

According to a recent United States Department of Commerce Economic Statistics and Administration report, world trade volume for goods and services is expected to increase 5.3 percent in 2015, up from 3 percent in 2013. Working with companies overseas can have a lucrative impact on your business, however, the opportunity does not come without risk. There are many potential pitfalls to expanding overseas that must be addressed in order to mitigate risk and improve profitability. Three of the major information-based hurdles that should be considered are: 1 - Availability - International data often is unavailable to credit professionals or it takes them too long to acquire. 2 - Freshness - International data is often out-of-date, increasing the chance of making inaccurate risk assessments. 3 - Consistency - Credit professionals can’t use the same analytical models across multiple geographies due to data differences. Experian makes it easy for our customers to expand into new territories through our enhanced international capabilities. We provide comprehensive insight into your international customers and vendors — both prospects and existing — that is accurate, up-to-date, easily accessible and highly actionable. This data helps you assess risk, reduce exposure to late payments and defaults, and be more competitive overall. In the below video Experian product manager, Greg Carmean discusses some of the challenges in international business engagements. Experian’s International Developed Profiles help Rubicon Project safely expand into untapped markets Rubicon Project is a technology company that automates the buying and selling of digital advertising. Their trading platform reaches a global audience of 200 million U.S. and 646 million global monthly visitors. Before they began using Experian, the company was hesitant to grant credit internationally due to the limitations of its previous sources. Rubicon Project is focused on rapidly expanding into new territories while providing world-class service and minimizing risk. In some geographic regions, online ad trading is a new concept that is generating considerable excitement, but this poses the challenge of being able to adequately navigate risk in uncharted waters. "With Experian's Business Information Services, we have access to comprehensive information that helps us uncover new growth opportunities," said Lorraine Moses Rubicon Project’s director of credit and collections. Most recently, Rubicon Project has been challenged with monitoring customers located in high-risk countries affected by recent economic challenges in the Eurozone and Latin America. “Experian simply has updated information on many of the customers of concern,” Moses, continued. “We have been able to grant credit to a large number of international customers that would have been declined because we were unable to determine credit worthiness due to limited information.”