Details Matter

Since our last post on the topic, not much has changed in the debate over small business lending:  no one is sure whether it’s lack of supply or lack of demand.  The topic is important and we’ll talk more about the continued lack of consensus and how WAIN Street could be helpful to the debate in a future post.  But here, we’d like to turn your attention overseas for a moment.

Our friends across the pond are also struggling with the similar issue: Why companies can’t get access to the credit they need to operate and grow.  Members of the British Labour Party are asking that UK banks publish their lending data geographically to uncover areas of the country that are being unjustly (or irrationally) ignored. They argue that exposing these “lending deserts” will spark competition and encourage alternative forms of lending.  In fact, they applaud the US for successful initiatives in this area.

Ignoring the irony that the UK’s Labour Party is pointing to US Banking policy as an example of sensible reporting requirements, this story demonstrates the not-so-shocking point that more detailed information about lending practices and portfolio composition can have real-world effects on lenders, borrowing businesses, and improve system-wide performance.  More transparency equals better results.  Rich data on geography allows drill down and analysis that can uncover things about a portfolio’s make up that are not obvious from a high level view.  Conclusions can be made, opportunities uncovered, and actions can be taken.

WAIN Street believes that this type of information and analysis can be used to help lenders better serve mid-market and small businesses. Our Business Credit Health Index enables lenders to dive deep into the details using more than just geographic breakouts.  Robust information about geography, industry, business size, and business age combine to paint a more complete picture of a portfolio’s inner workings and provide the difference making-details that can help lenders and businesses alike.