How Fintech Lenders Are Streamlining SME Loan Applications

Did you know SMEs (0-250 employees) are 99.9% of all enterprises and represent more than half (52.5%) of the UK’s turnover?

This sector plays a crucial role, and yet these companies often face laborious loan application procedures that feel far from supportive. Why do the smallest businesses (0-49 employees), which represent 99.2% of all businesses, constitute only 67.6% of turnover? Might easier access to funding free them up?

But think of a better way to get a loan for your business. A way that is faster, easier, and more accessible than ever before. And all this was made possible by fintech lenders. This blog shows how new tech like automated processes (RPA), smart systems (ML and AI), and easier banking tools help fintech lenders process SME loans faster.

How Fintech Makes Small Business Loans Better

Imagine you run a small business and need money to grow, hire staff, or buy equipment. With regular banks, you’ll face piles of forms and long waits, often just to be turned down. Fintech lenders are all set to change this by offering digital platforms that cut through red tape to give access to capital.

From automation to open banking, these fintech companies exploit sophisticated technology to make the applications faster, cheaper, and more customer-friendly, increasing SME access to the financing needed.

RPA in Lending: Automation at Its Best

• Automates Repetitive Tasks: Uses AI to mimic human actions for tasks like data entry, verification, and compliance checks, saving time on routine processes.
• System Compatibility: Interacts seamlessly with diverse systems (e.g., web browsers, databases, and spreadsheets) without coding or integration requirements, enhancing workflow flexibility.
• Error Handling: Can manage exceptions and errors based on predefined rules or escalate them for human review, maintaining process quality.
• Data Extraction: Automates the collection of data from documents such as bank statements, tax returns, and invoices. Since data will be automatically filled in loan application forms, fewer chances of introducing errors or committing fraud.
• Data Verification: Data is cross-checked with external sources like credit bureaus and government databases, and flags are raised in case of any discrepancy, ensuring accuracy and compliance.
• Automated Document Generation: Automates lending offers, contracts, and reports based on data and underwriting criteria, resulting in a smooth flow of communication and a great customer experience.
• Impact on Efficiency: Reduces turnaround time and increases customer satisfaction significantly by avoiding delays in complex processes.

According to Deloitte, a study notes that processing time can be reduced by up to 90%, increasing accuracy by up to 100% and costs by up to 80% for fintech lenders. It also scales up or down according to the demand and volume of loan applications without requiring any additional staff or infrastructure.

This gives fintech lenders a competitive edge over traditional banks that rely on manual processes and legacy systems that are prone to errors, delays and inefficiencies.

AI and ML in Underwriting

Fintech lenders also use AI and ML tools to process loan applications more efficiently and accurately. Whereas traditional banks are largely rule-bound and have linear models, AI-powered underwriting views a broad scope of data, including transaction histories, cash flow trends, and market conditions, to build far more nuanced insights into the creditworthiness profile.

In fact, a study by McKinsey suggests that underwriting models from ML and AI can increase approval rates by up to 50%, lower the default rate to up to 40%, and reduce the interest rate to up to 20% for fintech lenders. This leads to more rational lending decisions, reduced costs and risks, along with better experiences for customers.

User-Friendly Application Processes

Perhaps the biggest headache associated with accessing a loan from a traditional bank is the paperwork, documentation, and verification required. Most SMEs find this process frustrating and stressful when they need quick funding. Fintech lenders have fixed this issue by making the application simpler, easier to use, and more accessible.

Fintech lenders let SMEs apply for loans online whenever and wherever they want, without needing to go to a bank or make calls. They use digital tools like e-signatures, fingerprint scanning, and digital ID checks (e-KYC) to verify who borrowers are and if they qualify, all without paper forms or in-person visits.

Fintech lenders use online methods to keep borrowers updated about their loans and when to pay them back. For instance, we utilise Onfido verification here at Pulse for the users accessing our data analytics services.

Enhanced Customer Service

One of the advantages SMEs are sure to get when considering a fintech lender over a traditional bank is quality customer service. Fintech lenders have thoroughly invested in building solid relationships with their customers by offering more personalised, responsive, and flexible support.

Fintech lenders use digital tools like live chat and video calls with 24/7 support for the borrowers through their journey. Fintech lenders also use CRM systems to provide customer feedback, preferences, and behaviour and offer customised solutions and incentives. Fintech lenders also use NPS and CSAT metrics in order to track customer loyalty, retention, and referrals and then take steps to improve them.

Fintech lenders can also develop a community of loyally engaged customers who share their experiences, reviews and testimonials on social media and online platforms. As a consequence, fintech lenders end up with a competitive edge against traditional banks that operate as impersonal, slow, and rigid customer service providers.

Open Banking (OB) and Open Accounting (OA)

OB and OA enable fintech lenders to connect directly with the bank accounts or SME accounting software without having them share login credentials or download statements. This means a fintech lender immediately obtains updated financial information, like income, expenses, cash flow, invoices, etc. The fintech lender can then make decisions on loan eligibility, amount, and terms.

APIs are standard protocols for applications that allow different systems and applications to talk to each other safely and efficiently. An API, which enables open accounting and open banking, allows data aggregation and analysis, providing fintech lenders with better insights that the service can then use to recommend the financial health and performance of a small SME.

However, there are also enrichment and categorisation capabilities using APIs, which provide fintech lenders with a finer and more contextual comprehension of the financial behaviour and preferences of SMEs.

Streamlining Loan Applications in the Real World with Pulse

Pulse is an AI-powered dashboard designed especially for SMEs to understand financial performance better. With comprehensive data always at their fingertips, SMEs can make the best-informed financial decisions and be given access to essential funding when needed most. Using an integration with a business’s bank or accounting software, a business can easily share real-time financial data and enable a paperless loan process.

Pulse is an extremely agile, AI-driven platform that feeds business owners real-time analysis to help them make smarter financial decisions. Get in touch today to learn how Pulse can help transform the way your SME makes financial decisions and gets access to funding.