It is National Small Business Week and at Equifax we are celebrating
big with a lot of new announcements! 99.9% of businesses across the
U.S. are small businesses.1 That is why it is extremely important for
these businesses to have access to credit. We interviewed Bill Phelan,
General Manager for Commercial Business at Equifax, on how small
businesses can gain access to credit with our new product, OneScore
for Commercial. Our new product will help performance lift and
allow more loans to safely be approved allowing more small businesses
to receive access to credit.
Below, Phelan discusses the importance of small businesses,
what financial stress small businesses are going through in the
current economy, and how they can gain access to credit with our new product.
How are the finances of small businesses affecting the
Bill Phelan: By itself, the small business economy
would be a standalone economy and bigger than most economies
around the world. Small businesses employ 62 million Americans.
Thirty-eight million small and private companies in the United
States represent 11 trillion dollars of gross domestic product,
which is quite a meaningful portion of our economic activity in
the U.S. As a percentage that comes to about 47-48% of the total
GDP in the United States ($11T small / private company revenues
versus $23.32T total GDP in 2021). If we want to consider it
against the Gross National income of the US at $23.39, almost half
of the nation's income is spent with these small/private
businesses. These are people who work as dry cleaners, car washes,
plumbers, carpenters, and farmers, for example.
However, small businesses can be more susceptible to
economic headwinds affecting the macro market environment. That’s
what we are seeing today - the combination of high inflation, rising
interest rates, and market tightening is reflected in the finances
of small businesses. Small and medium sized business delinquencies
are ticking upwards and are at their highest point in two years
(Equifax Small Business Indices).
What’s going on in the economy?
Bill Phelan: Small businesses represent 1.5% of
total loans, which is still relatively low in the grand scheme of
things. That means a very small portion of these loans outstanding
are actually past due. And so, the financial health of these small
businesses remains very strong despite holding back investments due
to uncertainties in the economy.
We do see some spottiness depending on what industries and
what geographic region these businesses operate. For example, down
on the farm is very strong right now. The agricultural sector is
still doing really well and we don't see rising financial stress in
that segment. Also, we don't see it in construction, retail or
general Main Street American businesses, such as dry cleaners and
car washes. However, the transportation segment is seeing some
pullback, and that's to be expected. You would expect that as
there's less (GDP) gross domestic product, that shipping of goods
would also decrease. That being said, the overall financial health
remains strong even with some pullback by these small businesses.
What is OneScore for Commercial?
Bill Phelan: OneScore for Commercial is our new
credit scoring model. This technology uses our patented
neurodecision technology combined with explainable AI. The
performance lift from this is quite remarkable, quite dramatic.
What we've done with the OneScore for Commercial is we have broken
it out by the 12 major industry categories in the United States
private small business economy. These are retail, manufacturing,
real estate, agriculture, healthcare among others. The validations
show very strong results for our clients. We see that the
validations improve the predictive lift by anywhere from 33% up to
100% for our clients - which is really exceptional. What this
means for our clients is the opportunity to approve up to 15% or
20% more loans and applications to small and medium-sized businesses
versus what they would have done without OneScore for Commercial.
How is Equifax improving financial inclusion for small and
Bill Phelan: Equifax is investing during these
uncertain economic times to raise financial inclusion for small and
medium-sized businesses. We're making it easier to access the data
through our database waterfall capability. This technology allows us
to deliver the highest hit rates for our customers by leveraging
different databases that are specific to the commercial world. In
one case, for a major bank in the Midwest, we were able to deliver a
98% hit rate on the commercial businesses. The OneScore combined
with the database waterfall delivers 50% more scorable results to
This database waterfall also includes the business owner,
which is a key part of the decision when granting credit to small
and medium-sized businesses. That is something only Equifax
Commercial can do right now.
For more on OneScore for Commercial, click