The Real Reason Small Businesses Get Rejected, with Rohit Arora, Biz2Credit

Open banking adoption jumped from 35% to 80%, and it changed the economics: #

Rohit Arora, co-founder and CEO of Biz2Credit and Biz2X, points to a clear shift in his own platform’s data: in 2018-2019, only 30-35% of applicants connected their bank accounts via open banking; today it’s more than 80%. That single change lowered underwriting costs, sped up adjudication, and made ongoing portfolio monitoring possible at scale, which is part of why Biz2Credit has been able to attract insurance and pension fund money into SMB lending as an asset class.

The real rejection reason has nothing to do with creditworthiness: #

Arora is direct about the most common reason a healthy business still gets rejected: financial reporting, not creditworthiness. Late tax filings, incomplete compliance paperwork, or personal and business finances that are commingled make it impossible to isolate a business’s real revenue, which is enough on its own to stall an otherwise strong application.

Compliance cuts both ways: #

Arora draws a sharp line between sensible and burdensome compliance. Certifications like ISO and SOC lower due-diligence costs and make a business more creditworthy to lenders and partners, while state-level compliance burden, he names California and New York specifically, raises costs and pushes businesses out. He also traces Dodd-Frank’s unintended consequence directly: post-2008 regulation meant to rein in bank risk ended up pushing banks away from small and mid-sized business lending altogether, a gap that still hasn’t closed.

Why US capital markets pulled so far ahead of Europe’s: #

Once US rating agencies began treating SMB loan portfolios as a mainstream asset class, insurance companies, pension funds, and large asset managers started investing directly, which Arora says explains why alternative lending has gone from under 20% of the market to an expected 50%+ this year. His pointed observation: European insurance companies and family offices increasingly invest in US SMB lending rather than their own markets, because Europe hasn’t built the same securitization and rating infrastructure.

Why listen: #

For anyone building or evaluating a small business lending product, this episode is a grounded, data-backed case for where the real bottlenecks are: financial reporting and ownership structure more than credit scores, and a clear-eyed warning that AI will expose, not fix, the banks that never invested in clean data infrastructure.