Tackling the challenge of serving small businesses while conducting sufficient due diligence is a consistent problem across the financial services and insurance industries. As seen in a report by McKinsey, SMB (Small and Midsize Business) lending is a sector that rapidly growing alternative lenders have exploited while larger banks haven’t yet fully realized the opportunity. Furthermore, small commercial insurance is a tremendously untapped market that well positioned insurance companies can seize as indicated by Verisk.
Altogether, being able to properly work with small to medium size enterprises has become a necessary requirement for growth across the lending and insurance space. However, it is a problem that we’re very familiar with solving here at DemystData.
Despite the opportunity, understanding and working with small and medium businesses is hard to execute upon. There are some key distinct challenges that all financial services firms face when tackling this problem:
• A Consistently Dynamic Market – Small businesses are registered, closed, or sold everyday. It can be difficult to anticipate, engage, and sell to small businesses when the age of these companies can potentially be measured in months.
• Thin-File Companies – Many of these SMBs may have a limited paper trail or operate as a sole proprietorship. Obtaining the right risk indicators and proper classification of these organizations can be challenging if they’re not incorporated, have limited financial interactions, or operate within cash dominated supply chains.
• Differentiated Third Party Data – Not all third-party data sources are created equal, especially when it comes to small and medium businesses. Although these data sources may overlap significantly in coverage, each has their own strengths and unique emphasis. Being able to explore how your particular customer segment or target base is represented in these third party datasets is critical to a successful data strategy.
The DemystData Solution
At DemystData we take a multi data source approach to solving these particular problems. We understand intuitively that no single third party vendor would be able to solve the problems within small business verification and pre-fill. When approaching classic problems such as finding a FEIN (Federal Employer Identification Number), identified the type of business, verifying annual sales or profits, or qualifying the property characteristics of the business address, we leverage our expertise across 300+ different data products to find the attributes that do matter.
Some data sources we like to explore include:
Experian Business – a multi-tiered business data source that can source everything from firmographic information to credit scores (if available) to risk indicators such as judgements, UCC filings, and other red flags
Equifax Commercial (Austin Tetra) – an expansive business data product that has strong coverage in the United States and in Canada. They provide rapid resolution on businesses including multiple addresses, income information, classifications, and more.
Owler – Internet sourced data provider that has firmographic information, venture funding data, and revenue estimates. Their competitor search can also uncover potential prospects similar to existing clients.
Infogroup – Leading business data and marketing solution data provider that has verified firmographic information collated from public and proprietary sources, including web research, news, and user content.
Powerlytics – Provides aggregates of IRS filings for businesses in a region, can be segmented by 2 digit NASIC code (by industry). These can include business income ranges for a neighborhood filterable and income statement information such as median and range of income, costs, expenses, all filterable by industry segment.