Empowering Small Business Finance Through Data

In business, data is a valuable — if not the most valuable — currency. For small businesses in need of capital, data is vital to understanding how much a firm needs, and to assessing the likelihood of securing a stamp of approval from a financier.

But as the availability of data proliferates, the opportunities to use data in different ways is expanding, too. Not only can high-quality, granular information support SMBs’ access to capital, but there are other insights along the peripheral of the small business financing process that can further empower SMBs to strengthen their financial core.

In a new initiative announced by U.K.-based Close Brothers Asset Finance and Leasing, the company is introducing a free SME Data Hub, an aggregation of years of research the financing firm has conducted to present a range of insights and trends to small businesses, analysts and others.

Speaking with PYMNTS, CEO Neil Davies said the value in opening up this information to small businesses certainly lies in aiding their search for capital. But, as he explained, there are other opportunities that, as of yet, haven’t been revealed.

“Because it’s still so new, it’s too early to tell how [the SME Data Hub] is going to be used by small businesses,” he said. “But they could, for example, track the views of firms on expected economic performance in their sector and gauge whether it mirrors their own.”

The benchmarking opportunity is a strong one, particularly as small businesses begin to establish a path to recovery. With insights into late B2B payments, mergers and acquisitions activity, financial outlook, talent recruitment and other benchmarks, small business intelligence could gain visibility into factors that reach far beyond how their industry peers are searching for and obtaining capital.

But that doesn’t mean these insights are entirely separate from the SMB financing arena.

“The data is supplemental to existing investment strategies and how people use the data is clearly up to them, but there are results that may prove strategically useful,” said Davies. “For example, one question we ask is, ‘Does your business plan to seek funding for business investment in the next 12 months?’ If few others are looking to invest, perhaps it’s an opportunity to steal a march on the competition.”

While U.K. government initiatives to provide relief financing to small businesses continue to emerge, SMBs in the market have an opportunity to be more proactive about their financing strategies. Understanding industry-specific trends will be key, noted Davies, who added that for Close Brothers specifically, the impact of the pandemic on asset financing volumes has been “limited.”

What has changed, however, is the cross-section of types of businesses seeking financing. “Some sectors, like construction, have been very active,” he said. “Transport is almost split 50-50, with half doing well and half suffering, [and] moving people or international transport have seen obvious hits.”

Davies also pointed to what could be the beginning of a rising trend of insolvencies, and while the government initiatives could help to delay or stave off business closures, there is no guarantee of how impactful that relief effort will ultimately be on a small business’ ability to survive.

Interestingly, while small businesses will be keen to explore metrics directly pertaining to their ability to remain viable, Davies noted that so far, many SMBs have shown interest in “the more topical issues, ranging from Brexit to driverless cars.”

“This is because people want to know what their colleagues and competitors are thinking, he said, adding that “as specialist funders, it’s important that we understand the thoughts and views of the leaders in the sectors we operate in.”