Small business owners know that banks aren’t always there for them. They often see an opportunity to grow their business that requires cash on hand now — but banks aren’t always willing or able to provide that funding (at least, not without a hefty interest rate). I spoke to Victoria Treyger, chief marketing officer at Kabbage, about how her company seeks to help small business grow through innovative financing.

1. What do you see as some of the problems in the small business lending arena?

Small businesses aren’t getting funding as readily and as easily as they need because traditional lenders don’t base their lending decisions on holistic information. Most banks use just FICO scores to analyze financial risk; this strategy is too narrow in our opinion and experience. The traditional system underserves small businesses by making judgments based on the owners’ credit scores, not the general health of the companies.

You can’t apply traditional corporate metrics when judging the health of small businesses, especially online-only endeavors. We’ve heard hundreds of stories directly from small business owners about getting turned down for cash advances because they didn’t have enough revenue. They reply with a disheartened “But what about all this revenue coming in from eBay and Amazon?” and the bank looks back at them like they have three heads.

Kabbage connects to the data sources that small businesses already use every day—such as shipping, accounting, social media, ecommerce, payments and others—and leverages this data to deliver fast funding to small businesses.

Small businesses are vital engines for American job growth and production — and we need to get them the capital they need to grow.

2. What is on the horizon for small business lending? How is that area going to change, either through technological solutions or regulation, etc.?

For the last forty years, we haven’t seen a ton of innovation in this sector. Even up until a few years ago, it remained one of the few spaces the Internet had yet to revolutionize. Yes some sites put out money, but there weren’t many notable advances in the way companies were judged as lending partners.

We’re finally seeing big changes, namely the ability to use real business data to arrive at funding decisions quickly by looking at wide set of business data sources via APIs.

There has been an explosion of data created by small businesses as they shift to using cloud services to run their businesses for everything from their accounting software to invoicing to CRM. The immediate availability of this data creates many opportunities to better serve small businesses.

Fundamentally, we believe that the availability of data generated by businesses will change the lending landscape. Five years from now, you’ll see some banks moving to automation in their loan processing and use of holistic business data instead of traditional metrics like FICO scores for their underwriting. The exciting thing about these changes is that they empower small businesses, and create more options for them to be able to get the capital they need to grow.

3. What common mistakes do you see small business owners making when they acquire capital for their businesses?

The most important advice we give to small business owners is to plan ahead and focus on ROI when they think about where to invest their funds. Some of our most successful business owners plan all year long—and are smart to buy inventory from May through August where they can find great deals instead of, say, in October, when they are so close to the holiday selling rush.

In terms of ROI, our customers think about the return that they will be able to make on the funds they borrow and therefore to invest the funds in areas that help them to expand their businesses—like marketing programs, inventory, hiring staff.

Regardless, we recommend that businesses stay “scrappy.” For example, in marketing, they should first test small investments in spend to find the formula that really works.