Automating Small Business Lending with AI

Artificial Intelligence is transforming the way we bank. Fintech companies and start-ups are causing a revolution within the lending world, and as the ever-growing importance of data analysis for making informed business decisions increases, so does the demand for artificial intelligence and automation in modern business.

Often these two terms are used interchangeably as they are associated with software or physical robots and other machines which allow us to operate more efficiently, however there are significant differences between the complexity level of both systems.

What is the difference between AI and Automation?

Artificial intelligence – A system or machine which can be programmed to display self-learning through experience and understanding patterns. In short, mimicking human ability to think and do.

Automation – a piece of software that follows rules that are pre-programmed which are then applied to repetitive tasks.

How is it relevant to the finance and lending industry?

Digital lending has become a data problem due to the increasing volumes of users and transactions, which is why the process is perfect for machine learning. In order to keep up with shifts in trends within the rapidly increasing small business and start up industry, the Digital lending marketplace now uses these technologies to avail of loans at the single click of a button. These platforms enable paperless transactions, gather banking data for verification, perform credit decisions using AI and promise faster disbursement.

Companies using Artificial Intelligence and Automation for business lending

We have found some great examples of companies utilising advances in AI and automation to help small businesses get access to lending services faster.

  • Stripe – Stripe Capital provides access to fast, flexible financing for business growth.
  • Amazon – Amazon Lending is an invitation-only loans for established Amazon sellers to fund Amazon inventory purchases.
  • Paypal – Paypal Working Capital enables users to get a merchant cash advance in minutes with no interest and flexible terms.
  • Square – Square Capital offers exclusive access to business loans to grow a business.

By using this technology, these companies are able to provide:

  • Easy paperless application online
  • Automated analysis of multiple factors to determine loan eligibility
  • Approval based on account history, sales, customers and business growth
  • Fast loan decision within minutes

How Luna Connect uses technology to provide solutions for small businesses

Designed to fit into the rapidly evolving financial services ecosystem, luna connect is a new platform which is aimed at businesses lending to SME’s. By eliminating paperwork and using a single platform to process data, it is designed to help lenders make better quality lending decisions.

By using just two lines of code, the product is integrated into a lender’s website, and enables costs to scale in proportion to the value of the loan. This in turn improves margins, makes small-value loans more profitable and eliminates the issue of lenders relying on slow and expensive processes to reach a credit decision.