Three Ways Automation Fuels Small Business Lending

Small Business Credit, Commercial Credit

Building a business is fraught with risks. Chief among them is access to capital. A recent  survey by the Federal Reserve shows that 64% of small businesses face financial challenges and more than two thirds of them use their own personal funds to support their businesses.

The small business credit gap can be even more profound for certain groups of business owners. Low-income, women-owned and rural small businesses continue to face significant barriers in accessing much needed credit and capital. According to findings from the U.S. Department of Commerce Minority Business Development Agency, minority-owned firms are much less likely to be approved for small business loans than white-owned firms. If they do get approved, they are more likely to receive lower amounts and higher rates compared to non-minority applicants. 

New advances in technology, like automation, are creating end-to-end digital processes to make small business lending faster, easier and more accessible. One-click credit programs are closing the credit gap and easing the financial burden of small business owners. Here’s how automation is helping get more capital to Main Street businesses: 

  1. Speed: The traditional credit underwriting process can take up to 30 days and 99 hours of work to complete. Take step one – the application process for example. Lenders waste too many hours manually gathering, sharing and analyzing applicants’ financial statements. We recently launched the PayNet Financial Statement Report™ (FSR) to solve this issue. Now borrowers can use FSR’s automated technology to securely and seamlessly share financial documents with lenders, accelerating decision times to get loans reviewed and approved faster. 
  2. Inclusivity: Automated credit decisions reduce subjectivity and bias while giving lenders the ability to look at more than just credit. With automation, lenders can use large data sets to get a complete picture of the business – from account payables to daily customer transactions. That insight can help strengthen the case for borrowers with poor or little credit history or those in rural, unbanked communities. Expect to hear more about this dynamic as small business funding for underrepresented communities is becoming a Presidential campaign issue. 
  3. Reduced Risk: Large data sets help lenders see the bigger picture on emerging credit matters. No single analyst can view a thousand bad deals to figure out what is going on in the economy. Digital lending enables the lender to use large data sets to get a holistic view of risk. Advanced automation technology is also encrypted and stored in the cloud, adding another layer of protection. With data driven lending, lenders can make data driven decisions on their lending operations and loan portfolios. When commercial lenders are assured of risks, they’re more likely to make credit available, unlocking opportunity for small businesses.

Small businesses are critical to our overall economic health and invaluable contributors to our local economies. Increased access to loans and low-cost credit drives small business formation, creates jobs and boosts innovation. Automation and digital lending are increasing outcomes, widening the pool of approved borrowers and improving the lending experience.