How your accounting software could convince your bank to give you a loan: Intuit CEO explains

Michael Bailey Deputy editor

How your accounting software could convince your bank to give you a loan: Intuit CEO explains

Published 07 November 2013 11:08, Updated 07 November 2013 12:12

Accounting software vendors must tread carefully in the era of big data – the information they collect is highly private – however Intuit, the provider of Quickbooks, has launched a division where it claims customers’ books can help them get business loans from otherwise unwilling banks.“About 60 per cent of small businesses in the US try for a short-term loan at least once a year,” explains Brad Smith, who has lead Intuit’s 9000 employees since 2008.

“But the banks are struggling to find credit-worthy small businesses. Loans are still getting assessed on personal credit scores, yet most small business owners have maxed their credit cards and have borrowed money from their mum and dad.”

Intuit’s new Quickbooks Financing business uses the cloud-based data it already holds on its customers to try and give banks a better measure of their creditworthiness.

“We’ve written algorithms that include your inventory, your accounts receivable, your record of paying invoices on time, whether you’re making payroll, the current balance in your bank account – we think it’s a much better predictor for banks of whether the loan would be repaid,” Smith says.

The idea for Quickbooks Financing came out of the ‘10 per cent unstructured time’ which Intuit allows all of its employees – Smith borrowed the concept from his neighbour in California’s Mountain View, Google, when he became CEO in 2008.

The division has already been responsible for 400 loans to Quickbooks customers totalling $US20 million, and Smith says the concept will be developed for global distribution.

There could be a need for it in Australia, if a NSW Business Chamber report released on Wednesday is any guide.

An inability to access finance impacts about 10 per cent or 200,000 of Australia’s small-to-medium businesses, according to the report which was authored by Deloitte Access Economics and Professor Mark Cowling.

The report criticised banks for an overreliance on collateral to support business loans, and recommended the federal Government consider supporting a partial credit guarantee scheme. This would provide a fallback for banks willing to support entrepreneurs with good business plans but insufficient existing wealth to stump up collateral.

However the idea was immediately dismissed by federal small business minister Bruce Billson. He says changes to prudential rules which currently make business lending less attractive to banks than home lending, and more competition in the banking sector, will be more effective ways to change bank behaviour.