SMBs get a leg up in data with latest Codat partnership

Codat, a startup that provides APIs to link small-business fintech data to external services, is undergoing a new product partnership with Moody’s Analytics, a global provider of analytic tools and risk assessment capabilities.

The Codat API will be integrated into Moody’s CreditLens platform – a credit lifecycle management solution that speeds up the way firms collect, analyze and store credit data. According to Codat, the integration aims to more efficiently underwrite for small business loans.

Recent data by fintech juggernaut Plaid revealed that half of U.S. small and medium-size enterprises (SMEs) report that getting a business loan is difficult or takes too long. Although small businesses often seek small-dollar loans, these typically also have higher underwriting costs, which makes them more difficult for banks to efficiently offer.

“The long-term vision for this partnership is to improve credit access to millions of small business owners nationwide,” the firm said in a release.

For Peter Lord, CEO and co-founder of Codat, the partnership also means potentially reversing factors that lead to a credit crunch for SMEs, all while opening a new line of business.

“We find ourselves in a time of rapid change, where new approaches to financing and technology are
becoming increasingly important to small businesses,” said Lord.

Codat’s API will essentially enable automated spreading of accounting data through machine learning – a process by which financial services businesses can get data from their customers’ accounting records into their own analysis tools without requiring any manual data entry.

The company’s approach to data APIs has proven fairly successful. In July 2021, it managed to close a $40 million round led by Tiger Global. At the time of that raise, Codat shared it had grown its annual recurring revenue by 3x from the end of 2019 to the end of 2020. And Lord expected to do it again in 2021.

Codat has also been previously backed by both PayPal Ventures and American Express Ventures and was even integrated with Zettle, a PayPal payments company that serves SMBs.

Prior to Friday’s announcement, Codat partnered with Intuit to speed Quickbooks app development. That union emphasized the freedom of data sharing, with Lord citing the partnership would start a “larger conversation about the need for open finance” for SMBs.

Although accounting APIs have historically been more open than banks, there is still copious red tape and hidden barriers that prevent small businesses from freely sharing their data, the company noted.

“We are both dedicated to helping financial service businesses gain deep understanding of their client’s risk and behavior, and make better decisions based on real-time accounting, banking, and commerce data,” said Eric Grandeo, Product Head for Moody’s Analytics Lending Solutions. “Ultimately, the partnership will afford small businesses across the U.K and U.S. access to more credit options, opportunity and growth.”

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