3 Common Small Business Lending Challenges and How Technology Can Help
                     3
Common Small Business
Lending Challenges and
How Technology Can
Help
Created by: James Mary
 pg. 2
Table of Content
Introduction…………………………………………………………….……………………..
……………..………………………………………….. 3
Manual Lending 
Processes………..................................................................................................….
……….. 3
Optimizing the Loan Origination Process…...…...
………………………………………………………......………..……… 4
Getting Real-Time Financial Data of Borrowers....…………………………………..
……….………………...………..  4
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Introduction:
An  important  component  of  the  modern  financial  market,  small
business lenders are fueling the economy and for the better. They offer a
wide  variety  of  loan  products  and  services  and  provide  capital  for
businesses with less than stellar credit ratings, making them the preferred
choice of SMEs for loans, over traditional banks and credit unions.
Today,  small  business  lenders  leverage  technology and  modern
methods  to  provide  highly  customized  solutions  to  suit  the  needs  of
particular clients. With increased competition in the small business lending
industry and the high cost of borrowing, every lender needs to follow the
best lending practices to stay ahead of the competition, improve customer
experience and make better lending decisions.
Modern  borrowers  are  tech-savvy and have higher  expectations  when it
comes  to  credit  facilities.  Data,  technology,  and automation  are  helping
lenders to satisfy their customers’ needs and take their organization to the
next  level,  however,  there  are  some  common  lending  challenges  that
lenders need to overcome.
Manual Lending Processes:
Manual  and  paper-based  lending
processes can be challenging and
time-consuming.  Small  business
lenders  need  to  gather  various
financial  documents of  their
borrowers to check their ability to
repay  the  loan,  principal  plus
interest.  Manual  evolution  and
verification  of  these  documents
can  take  from  a  few  days  to
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months.
To  avoid  this,  lenders  must  digitize  their  lending  processes  and  replace
manual, paper-based processes with automated ones. Automation can allow
small  business  lenders  to  streamline  the  disparate  systems,  providing
reliable and consistent data flow for any stage of the lending process.
Optimizing the Loan Origination Process:
For many small business lenders, the
process  of  providing  a  loan  from
applying  to  approving  can  take
months. From endless documentation
collection  to  unbalanced  credit
workload,  old-school  credit  scoring
methods, and inaccurate, incomplete,
and  outdated  data,  there  are
numerous  challenges  that  small
business  lenders  face  in  their  loan
origination processes.
These  days,  small  business  lenders
can  use  loan  origination  software  to
solve  loan  origination  challenges.  It
allows lenders to manage and automate various stages of the loan lifecycle.
From  data  gathering  to  fund  disbursement,  loan  origination  software
digitizes the overall lending process.
Top 3 Technologies Banks Must Embrace to Survive and
Stay Competitive
Getting  Real-Time
Financial  Data  of
Borrowers:
Many  small  business  lenders  still  use
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old-school  credit  scoring  methods  to  determine  a  borrower’s
creditworthiness.  They  use  traditional  data  points  such  as  credit  score,
annual revenue, business history, and collateral, to assess the ability of a
borrower to repay the loan. Though this data is not sufficient to make
smarter  lending  decisions.  Earlier,  lenders  didn’t  have  the  tools  and
technology  to  collect  real-time  financial  data  of  their  borrowers.  Today,
some  FinTech  firms  provide  innovative  financial  data  APIs  that  lenders
leverage  to  access,  analyze,  and  use  the  most  robust  and  real-time
financial  data of  their  borrowers.  These  firms  use  advanced  analytics,
predictive  modeling,  AI,  and  ML-based  systems  to  collect,  standardize,
normalize and transport the most robust, accurate, precise, and real-
time data to lenders.
Since  cash  flow predictive  data  allows  lenders  to  accurately  predict  the
financial future of a business, they will be able to better determine if the
business has the ability to repay existing debt obligations and purchase new
loans.  Ultimately,  it  will  help  lenders  to  enhance  their  underwriting
processes, reducing loss and providing a better customer experience.
If you want to stay ahead of the competition and take your lending business
forward, you have to provide easy and fast funding to your customers to win
their trust and improve their experience. The perfect blend of technology
and real-time cash flow data will help you streamline the whole lending
process,  identify  and  meet  your  customers’  needs,  improve  customer
experience and overcome various small business lending challenges.
Sources: 
  5 Common Lending Challenges Faced By NBFCs and How To Overcome 
Them? - Finezza Blog 
  5 Common Lending Challenges and How Software Can Help | Abrigo  
References:
  https://www.dailyadvent.com/news/b6cdd4aed6fa0c63567bc4f6bff0e6 
01-ForwardAI-Debuts-ForwardAI-Precise--A-New-Lenderfirst-API-That-
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Delivers-Realtime-Robust-Accounting-And-Financial-Data-Suite-For-
Reducedrisk-Small-Business-Lending
  https://cashvisionusa.blogspot.com/2021/06/top-financial-data-trends- 
are.html
  https://www.forwardai.com/precise 
  https://www.moodysanalytics.com/articles/2018/maximize-efficiency- 
how-automation-can-improve-your-loan-origination-process
  https://www.consumerfinance.gov/ask-cfpb/what-is-the-ability-to- 
repay-rule-why-is-it-important-to-me-en 
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