Digitalization has brought automation to virtually every sector of the business world. Machine vision systems now automatically detect defects in products that roll off of automated assembly lines, self-checkout kiosks automate the purchasing process in fast food, retail, and airports, and automated chatbots have become the standard in e-commerce.
In the financial sector, automation is revolutionizing the way financing happens. New systems, many of which integrate artificial intelligence, have significantly streamlined the financing process. As a result, businesses seeking financing should consider new strategies that account for the increased reliance on automation.
Setting a new pace for financing
Businesses seeking financing typically take one of two routes. They submit an online form either directly with a lender — which then begins the evaluation process — or with a broker, who shops the application to hundreds of potential lenders.
Automation allows the broker to complete their search at mind-blowing speeds. A search process that would have taken as much as eight hours to complete in the past can now be done in less than a minute with the help of automated systems.
Understanding the benefits
For borrowers, the blazing speed of today’s financing dramatically improves the decision-making process. Businesses can now know if they will have funds to pursue opportunities in a fraction of the time it took prior to automation, which helps with hiring talent, launching new products, and taking advantage of discounted pricing.
Automation also provides a number of benefits to brokers, as increasing the speed of processing allows them to increase the volume of requests they process. In this way, automation provides a boost to overall profits.
Automation also gives brokers the time to consider more information in their assessment process by empowering them to look at millions of past transactions involving similar characteristics to obtain a more detailed understanding of the risks involved. Automation allows for multi-level assessment that results in a more informed decision-making process.
Robust systems providing multi-level assessments also empower brokers to provide anticipated offers. By considering the business’s industry, the years in operation, its FICO score, and other factors, a broker can access data that reveals if similar applicants have received financing in the recent past.
Without automation, that type of advanced processing would not be possible.
Recognizing the pitfalls
Taking advantage of the speed automation brings to financing requires caution. There are a vast number of brokers in today’s market who are using automation to streamline the financing process and they are not all created equally.
Businesses should absolutely explore customer reviews as part of their financing strategies, as a fast approval means nothing if the company providing it does not reliably see the process through. Ideally, businesses will secure a good referral from a trusted business leader in their network who has worked with a broker in the past.
On the broker side, it’s crucial to remember that AI is always learning, so assuming its recommendations are flawless is risky. Allow it to augment processes, but not to run them.
With AI, it’s important to understand the logic behind its decisions. For example, data analysis conducted by AI may find that an applicant is not likely to be approved based solely on the past performance of funding given in the applicant’s zip code. While that suggestion is valuable, there may be other factors in play with a particular applicant that would minimize the significance of its zip code.
Ultimately, automation improves agility. In the world of financing, that means businesses can spend less time wondering if they will have the funds they will need to take advantage of business opportunities and pursue their business goals.
To achieve that agility, financing strategies should be adapted to leverage the speed provided by brokers employing automated processes.
– Jay Avigdor is the President & CEO of Velocity Capital Group, a direct funding platform located in Greater New York that funds small businesses nationwide, servicing over 15,000 clients since its founding in 2018. A noted finance expert with a 13-year career, Avigdor has developed an extensive network of over 40,000 relationships with clients and brokers, contributing to an impressive $850 million in sales. His innovative technological approach is setting new trends in the industry by merging finance with technology through automation, thus allowing a quicker and smoother process for merchants and brokers serviced. Avigdor is a graduate of Touro University and currently lives in upstate New York.