Commercial lenders to small business often mistakenly rely on short-term payment history (e.g. trade payables) to make long-term lending decisions. A traditional credit bureau report only tells a lender how an applicant has paid on its light bill, utility bill, or overnight express bill. Additional trade data details an applicant’s payment performance on purchases of raw and intermediate materials and components, but does not capture payment history for the machinery that fabricates the final product.

PayNet has answered the market call for more comprehensive small business credit information by compiling the largest proprietary database of long-term contracts (average contract term – 3.6 years) ever assembled, over a period of eleven years. Commercial lenders now have the ability to make long-term lending decisions based on comparable credit through access to PayNet’s Credit History Report (CHR). Each CHR contains actual commercial loan and lease credit histories. Intuitively this makes sense – automobile insurance underwriters, for instance, look to prior accidents when underwriting new car insurance policies.

For those commercial lenders using scoring models in conjunction with an application processing system, our research shows that the models built from comparable credit outperform commercial scoring models based on net-30-days data. Models built with comparable credit outperform other models because commercial loan repayment history is used to predict future commercial loan repayment performance – a significant advantage.

PayNet’s term debt history has proven to be a more reliable indicator of a borrower’s payback performance through economic cycles by improving small business credit risk identification, assessment, and mitigation across the commercial lending spectrum. It allows PayNet members to make better-informed lending and portfolio management decisions. Please see The Data and Database for further information on this value-added resource.

In the event that a business has not had term credit, PayNet can provide materially significant ($500 minimum) trade credit information.