Big data. Rather than green-shaded bankers, online upstarts like Kabbage, OnDeck and others employ data scientists who crunch hundreds or thousands of data sources to assess whether a person or a business is a good credit risk. By looking at current and realtime data, rather than solely backward-looking credit histories, they able to make loans that banks, which are heavily regulated and tethered to legacy IT systems, cannot. In other cases, the loan amounts are too small for a bank to be interested.
Alternative lenders approve around 60 percent of small business loans, compared to just 20 percent or so approval rates for big banks, according to Biz2Credit, a site that matches small business borrowers with lenders.
