YouLend offers a tech-first approach to SME financing

Short-term business funding is the lifeblood of small- and medium-sized enterprises (SMEs). It can unlock opportunities to grow and scale, such as buying new equipment or hiring seasonal staff. Yet, two in five SMEs say they lack sufficient capital to keep their businesses going—a shortage of funds that can squash a good business idea and even lead to bankruptcy.

According to YouLend CTO Mark Ufland, a major reason is that traditional banks struggle to underwrite SMEs in an automated manner. Many rely on traditional lagging data points such as statutory account filings which are hard to process at scale and often poor indicators of affordability when underwriting businesses.

“Furthermore, banks must hold significant capital against SME loans, rendering them less profitable, especially if they have a heavy cost structure for underwriting,” adds Ufland. “The result is that banks are less interested in this space.”

Over the past decade, tech companies like YouLend have stepped in to fill the gap. By evaluating nonconventional data points such as a business’ monthly card payment data, immediate cash flow, repeat buyer behaviour, and digital footprint (in addition to more traditional measures of creditworthiness), YouLend’s software platform can extend credit to SMEs that otherwise might not qualify.

In order to strengthen the assessment of a business’ immediate cash-flow position, YouLend needed applicants’ bank statement data without the hassle of the applicant uploading files or photographs. That’s when YouLend turned to Plaid.