Transforming The Way Business Owners Access Capital

Arleo Dordar, Managing Director & Founder at Venture Plans.

In 2027, the financial services industry is expected to spend just under $100 billion on artificial intelligence (AI)—a nearly 30% increase per year since 2023. Why? Because AI has reshaped the industry. From customer service to underwriting to loan servicing and beyond, the way financial institutions do business has been transformed by AI.

If business owners want to maintain access to the capital that will help them build their enterprises, they’ll need to learn how to operate in this new state of play. With automated risk assessments, faster loan approvals and personalized solutions, they have more options than ever.

But so do their competitors.

The Current Industry Landscape Of AI And FinTech

Over the past decade or so, AI-powered lending platforms have emerged to disrupt traditional institutions. Using AI, companies like Kabbage, Fundbox and Bluevine are able to assess financial health in real time, which allows for quicker decision making and more data-rich, customized solutions.

Major institutions have quickly followed suit. In 2020, American Express acquired Kabbage, a sign of its intent to provide AI-powered banking to its millions of small business customers.

Moreover, leading banks like JPMorgan, Capital One, and Wells Fargo have all developed teams who are dedicated to AI research. Last Spring, Daniel Pinto, President & COO of JPMorgan, told investors that they expected the total value of their AI use cases to add up to between $1 and $1.5 billion.

Clearly, the industry is throwing its weight behind AI.

Faster And More Efficient Loan Approvals

Traditional bank loans can take weeks or even months to underwrite. In some cases, AI-powered underwriting is able to process loan applications at 20 times that speed.

Here are seven ways AI turbocharges the loan approval process:

1. Automated processing: AI can instantly analyze and verify submitted documents, reducing human error and time spent on review.

2. Real-time credit assessment: AI can rapidly assess creditworthiness by analyzing financial statements, transaction history, cash flow trends and more.

3. Instant risk evaluation: Many models built on machine learning can predict default risks more accurately than traditional underwriting.

4. Fraud detection: With instant access to terabytes of financial data, AI can detect inconsistencies and fraudulent patterns with stunning speed and precision.

5. Chatbots and virtual assistants: These agents provide an immediate point of contact between lender and applicant, eliminating customer service backlogs.

6. Personalized loan offers: AI can dynamically provide options when one financing avenue falls flat, creating opportunities that may otherwise have been overlooked.

7. Streamlined compliance checks: AI speeds up compliance by automatically checking applications against regulations, standards and best practices.

Challenges And Considerations For Business Owners

Before we get to how you can capitalize on these new developments in fintech, it’s important we acknowledge a few of the new challenges presented by AI.

1. Navigating New Financial Technologies

Beware the temptation to chase the shiniest new technology. Grabbing an opportunity just because it’s new is a sure way to misstep. Before deploying a new business management tool or approaching an AI-powered financing opportunity, take the time to learn and understand the space. Better, engaged financial advisors who have expertise in AI can help guide your way. (Disclosure: My company helps with this, as do others.)

Avoid advisors who downplay risks, promise fast approvals without proper due diligence or seem unwilling to disclose their fee structure transparently. When looking for the right advisor for underwriting loans and financing, prioritize those with extensive experience in your specific industry and a deep understanding of credit risk assessment.

2. Data Privacy And Security

Not every AI platform ought to be trusted. Business owners must ensure they use reputable platforms that comply with whatever data security regulations apply to their jurisdiction and industry (e.g., the General Data Protection Regulation [GDPR]; the California Consumer Privacy Act [CCPA]; etc.). Carelessness could result in a data breach and/or the accidental (and illegal) disclosure of sensitive customer data.

3. Ethical And Bias Considerations

Machine learning is only as smart as the data it’s trained on. Business owners should know that AI-driven models sometimes carry biases that may impact loan approvals or financing terms. Once again, do your homework and choose providers who prioritize fairness and transparency in their data collection and analysis.

The Future Of Business Financing

The decentralizing and democratizing impulses that are driving so much in our world right now (from politics to education to real estate) have made their way into finance, and AI-powered fintech will only continue to further that trend.

Open banking is becoming a game-changer for businesses, allowing them to share data with a host of lenders and financial service providers. AI-driven advisors and decentralized finance (DeFi) solutions are also growing in the marketplace, offering businesses new ways to manage their assets and access capital without relying entirely on traditional financial institutions.

Owners who embrace these new technologies could have a competitive advantage in the years to come. Quick and efficient access to capital, optimized asset management, data-rich financial insights—these are just a few of the “edges” that I think will be key to sustainable growth.

Maintaining A Competitive Edge

How can business owners leverage these advances to maintain their competitive edge?

1. Get smart. Read up on fintech. You don’t have to be an expert, but you should be fluent in the basic terms and conversant with the variety of options and opportunities available.

2. Seek help. Don’t try to do this on your own. Seek out a competent financial advisor who can help steer you through the high-tech thicket that is fintech.

3. Make a plan. Set priorities and determine which elements of your financial house (management, capital access, reporting, etc.) need the most immediate attention.

4. Start small. Implement one tool or platform to help with one process. Work out the kinks, dial in the operation, and learn how to milk the technology for all its worth.

5. Scale up. Once you’ve successfully implemented a new technology, add another. Weave new processes and platforms together as you rebuild your financial house brick by brick.

Business owners who take these steps right away can put themselves on a path to making the most of AI-powered financial technology to grow their businesses.

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