We’ve been attending a number of trade shows lately and talking to a variety of businesses about the state of trade credit. Almost everyone we talk to acknowledges that trade credit is broken, but they’re not entirely sure they understand why Credit Key is such a good replacement.
Well, have no fear, because we’re going to take a peek under the hood (just a small peak), so you can know exactly why the Credit Key solution is needed. In fact, it all comes down to one word:
In traditional trade credit, very little reliable data is used to approve or deny a credit application. Often, a B2B merchant relies on information from Dun & Bradstreet and references. Some merchants will even look for the CEO’s FICO score, but this isn’t standard across the board.
What’s the problem with these? Well, for starters, Dun & Bradstreet data is somewhat incomplete. It often doesn’t obtain information on smaller and newer businesses, and the information that it has isn’t always current. Businesses have to pay to have D&B review their credit reviewed and keep it up to date. What happens when a company hits a financial bump in the road, though? They’re not likely to pay for keeping their credit history up to date, especially if they’ve fallen behind on payments to another merchant.
That leaves us with references. If you’ve ever hired somebody, you know that references are worth next to nothing. The person being hired is only going to provide references who will say positive things about him or her. It’s the same when asking for business references. You’re not likely to find a business providing a reference to a company that they stiffed.
And finally, looking at a CEO’s FICO score isn’t bad, as it could be a good indicator of how well (or poorly) a CEO runs a business. This is mostly relevant to the risk of financing purchases for smaller businesses. The problem here is that a) it’s not a standardized practice and b) the person making a B2B purchase may not have the ability to provide the CEO’s data and authorization to check the FICO score. In other words, it’s a somewhat unreliable method.
That still leaves out the biggest downfall of trade credit: It’s a lengthy process that can last anywhere from 24 hours to 20+ days. In today’s fast-paced business world, that’s an awfully long time to wait to approve a credit application and finalize a sale. In fact, for some businesses, that could be the difference between winning or losing a new customer, or having a profitable month or not.
Credit Key, on the other hand, takes a look at some of these traditional data points but we have also developed a highly accurate, proprietary algorithm that takes non-traditional data points and determines a business’ creditworthiness in real time. In today’s digital world, business leave a trail of data that can be collected and mined, and using machine learning, we’ve been able to analyze large data sets to define the signals that make a business creditworthy.
Most merchants don’t have the capability to find and process this type of data, or the technical ability to build a system that can assign risk. Moreover, no one wants to take risk for short-term 0% loans. But Credit Key will take that risk, and using our proprietary system, we will obtain and analyze all the information we need to make a decision on a credit application. And it really only takes a few seconds.
The bottom line is that financing and credit isn’t in most merchant’s DNA. But it’s in ours.
Want to see it in action? Contact us for a demo.