Small Business Spotlight
Report Summary:
The Small Business Spotlight report provides a broad picture of the use of cash-flow data in the small business lending market and an overview of policy issues that may be particularly important in determining the pace of adoption going forward.
The report tracks growing use of bank account and other cash-flow data across a diverse range of providers, including marketplace lenders, traditional banks, community development organizations, and other new entrants. The data is useful because it provides a more detailed, timely picture of small businesses’ income flows and cash reserves than traditional credit history information.
While use of cash-flow data appears to be spreading more rapidly in small business lending than consumer lending, a number of market and policy issues could affect its further adoption. These issues include technology and cost hurdles for small banks, data security and privacy considerations, and increasing confidence in the reliability of the data among investors and regulators.
Download the Small Business Spotlight reportDownload the Fact Sheet hereAcknowledgments
FinRegLab’s small business research and report, The Use of Cash-Flow Data in Underwriting Credit: Small Business Spotlight, was made possible through support from the Milken Institute, the JPMorgan Chase Foundation, and The Rockefeller Foundation. FinRegLab was established with generous support from Flourish, which has also provided core support for the cash-flow data project. Detailed information on each of our funders can be found on the inside back cover.
Flourish is an evergreen, early-stage venture fund investing globally in entrepreneurs whose innovations help people achieve financial health and prosperity. Spun out of Omidyar Network in 2019 with an existing portfolio of $200 million, Flourish received a new commitment of $300 million from Pam and Pierre Omidyar, the founder of eBay. Flourish invests in a number of themes in fintech, insurtech, regtech and other technologies, as well as supports nonprofit organizations, that empower people and help foster a fair, more inclusive economy. Flourish is managed by a global team with offices in Silicon Valley, Washington DC, London, and India.
For more information visit www.flourishventures.com or join our community through Twitter, LinkedIn, Instagram, and Medium.
The Milken Institute is a nonprofit, nonpartisan think tank that helps people build meaningful lives, in which they can experience health and well-being, pursue effective education and gainful employment, and access the resources required to create ever-expanding opportunities for themselves and their broader communities.
JPMorgan Chase & Co. (NYSE: JPM) is a leading global financial services firm with assets of $2.6 trillion and operations worldwide. The firm is a leader in investment banking, financial services for consumers and small businesses, commercial banking, financial transaction processing, and asset management.
The Rockefeller Foundation advances new frontiers of science, data, policy, and innovation to solve global challenges related to health, food, power, and economic mobility. As a science-driven philanthropy focused on building collaborative relationships with partners and grantees, The Rockefeller Foundation seeks to inspire and foster large-scale human impact that promotes the well-being of humanity throughout the world by identifying and accelerating breakthrough solutions, ideas, and conversations. For more information, visit www.rockefellerfoundation.org
We particularly would like to thank Aron Betru, Dan Murphy, Jackson Mueller, and Mike Piwowar with the Milken Institute Center for Financial Markets for their engagement with this work.
We are particularly grateful to Arthur Baines and Marsha Courchane, Charles River Associates, for their counsel in developing the research design, data analysis, and reporting of the research results detailed in this report and in FinRegLab’s previous report, The Use of Cash-Flow Data in Underwriting Credit: Empirical Research Findings. We are also grateful to Tom Brown, Paul Hastings, for legal assistance throughout the course of the research process.
We would also like to thank the following individuals who provided feedback on this report. They include:
- Brian Graham, Alliance Partners
- Lawrence D. Kaplan, Paul Hastings
- Joyce Klein, Director, Business Ownership Initiative, The Aspen Institute
- Jessica Milano, Member of the Board of Directors, Small Business Majority
- Karen Mills & Annie V. Dang, Harvard Business School
We would also like to acknowledge the FinRegLab team who worked on this Spotlight report. They include: Jennifer Chasseur, Kelly Thompson Cochran, Aaron Milner, and Stephen Stolzenberg.