The Value of Marketing Metrics in Credit Risk Assessment: Evidence from Small Business Customer Relationships

Small businesses play a vital role in economic growth but often face barriers in securing external credit. Traditional credit scoring models frequently fall short due to unreliable accounting information and the rise of asset-light business models. This research examines the potential of marketing metrics from customer transaction data as an alternative source of information for assessing small business creditworthiness. Customer transaction data capture behaviors, loyalty, and revenue patterns, providing dynamic measures of financial health that traditional ratios cannot provide. Through analysis of 988 small business loans and over 1.1 million customer transactions, we demonstrate that integrating customer metrics improves default prediction accuracy by up to 17%. These insights also facilitate financial inclusion, increasing lending to female-led businesses (+17.2%) and rural enterprises (+7.7%). This study develops a theoretical framework linking customer relationships to business stability and creditworthiness, providing a practical approach for addressing longstanding challenges in small business lending.