Experts in AR Management & Business Risk

For over 25 years, A2 Resources has been helping commercial credit organizations gather detailed insights about their operational environment so as to identify pathways to higher performance. Coupled with our fluency with business and risk data we are able to provide our clients with actionable insights apropos their portfolios and external market opportunities. Our strength is understanding the roles automation and technology play as catalysts for organizational transformation, while never forgetting that ultimately it's people that make the difference.

O2C Process Improvement & YVCM

We help clients with all aspects of the order-to-cash process by providing insights into policy, organization, and automation that drive performance improvement - for small businesses we've created Your Virtual Credit Manager (YVCM)

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Business Insights & SMB Risk Intel

Collecting market & risk information on Small & Medium Enterprises is a challenge. We work with data sources that provide unique insights into businesses, owners, and their markets as well as financial, industry, digital, and environmental risks

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Marketing Communications & Industry Analysis

O2C process innovations too often don't get the press coverage they deserve. We help vendors educate financial management execs about the opportunities as well as provide insights about the vendors

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We are conveniently located in the Mid-Atlantic region with easy access to the Washington, Baltimore, Philadelphia & New York metropolitan areas and beyond

Insights from A2 Resources

The Reality of the Market for SBA 7(a) Lending: “Plenty of Room for Growth, But a Need for Targeted Marketing”

As experienced SBA Lenders know, the 28 million Small Businesses nationwide is not the actual size of the market for 7(a) Loans. It is much smaller because only 10% of Small Businesses can qualify for an SBA loan on both an eligibility and credit worthiness basis. Accounting for these factors and several others, a market size of roughly 1.5 million for SBA 7(a) Lending seems more realistic - smaller, but still large enough to support the future growth of 7(a) Lending. 

In 2018 more than 60,000 small business were financed through SBA Programs. While it was a highly successful year, from another perspective it represents only 3% of the potential market. There is plenty of room for growth! 

In our view, many Community and Regional Banks have the greatest potential to grow their SBA Programs by identifying and developing the growth potential of their local markets. To realize this growth, we believe Targeted Marketing Programs are needed. 

Our Program, SBA Market Insightsprovides Community and Regional Banks the key element of all successful targeted marketing programs: the capability to identify SBA Loan Prospects in their markets with a high probability of becoming a funded loan.  

These are High Value SBA Prospects because they have these characteristics: 

  • They meet SBA Eligibility and Creditworthiness Qualifications
  • They have a low probability of defaulting on loan payments
  • They operate in one of the top 20 industries accounting for 76% of all 7(a) Loans
  • There is information on them readily available to evaluate their business and credit profile
  • There is current, detailed contact information on them to focus a targeted marketing program
  • They have a need for financing within 90 days

Community and Regional Banks do not need to lend out of market to grow. They need better marketing tools to identify SBA Lending Prospects that will enable them to grow locally and lend sensibly. 

Nature of the Small Business Risk Evaluation Problem

Most credit decisions in the Small Business Market are decided on the basis of the personal credit worthiness of the owner of the business. This is due to the fact that there is very limited actual credit information on this segment of the market. 

  • Out of the 30 million plus businesses in the US, less than 5 million have any reliable payment history available. 
  • Fewer than 9 million have any standard risk scoring such as the Experian Intelliscore. 
  • Thus there are some 21 million small businesses without any or very limited credit information available (2/3rds of the businesses). 
  • The lack of available credit information is significantly worse for businesses with less than $1 million in sales. In this category only about 10 percent of the business have any payment history available. 

The use of personal information for evaluating small business credit poses a number of issues for credit originators. Many financial businesses regard selling credit products to small businesses as a marginally profitable activity. This is because marketing costs are regarded to be high due to low offer response rates and the resultant high contact costs, higher credit evaluation costs due to marginally useful information from the credit bureaus, relatively lower product usage rates and the potential for higher default rates. These elements are true primarily due to the following: • 

  • Personal credit information can only be employed after the applicant has applied for credit and not for marketing purposes. From a marketing standpoint, most direct credit marketers mail only those cases which have some credit information and which have better risk ratings within the limited credit information sphere. Thus, marketers continually contact some 3-5 million businesses for credit offers greatly dampening response rates. This also means that over 25 million businesses are contacted for credit products only on a sporadic basis - a great opportunity if you can identify those businesses from this group with acceptable risk profiles.
  • A number of major industry studies confirm that on average 20% of a small business’s performance is explained by management’s abilities and 80% from economic, market, and competitive factors. • The present risk evaluation methods are not necessarily predictive of the future, for they rely predominantly on very limited past payment history, and usually for logistics or utilities - not industry suppliers.  • 

Most small businesses are captives of their immediate market areas. They can’t grow faster than the norm because competitors would soon step into such a market. If they grow slower than the average for their industry their businesses will suffer cash flow problems.

The impact of economic conditions within the local market is generally a better gauge of how companies will pay their bills in the future. If economic conditions are worsening then retailers and service industries will feel the impacts first followed in time by suppliers to these industries. Examination of personal credit histories does not generally reflect future economic conditions except after the fact. 

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