Financial inclusion refers to making sure individuals and groups who have traditionally been underserved by financial institutions can get access to the financial products and services they need.

Banks working with small and medium-sized businesses (SMEs) have multiple challenges when it comes to financial inclusion. Lenders specializing in small business loans must meet business needs while managing costs and diversifying their loan portfolios. Traditionally, that’s easier said than done. As more small business owners are unable to qualify for bank loans, many have turned to alternative lenders online.

Because of automated SME lending solutions, smaller banks can approve more loans, lower their costs, and serve a wider range of small business owners – even if traditional financial institutions have previously underserved them.

How Automation Improves Efficiency for SME Lending Solutions

Banks can now access the same SME lending solutions technology as alternative lenders for faster, easier, and more accessible financing for small business owners. Automation replaces many manual steps with digital ones, resulting in greater operational efficiency, fewer errors, and an expanded reach to serve a more diverse group of small businesses. Here are a few areas automated SME lending solutions can help:

Complete Loan Management

With a comprehensive platform lending solution, loan servicing teams can manage the entire loan process in one place, including:

  • Applications
  • Risk assessments
  • Credit approvals
  • Regulatory compliance
  • Closings
  • Payments
  • Post-loan servicing
  • Customer service

Faster Application Processing

With digital SME lending solutions, the loan application process is completed through SaaS lending software. Borrowers apply online at their convenience. Document management and loan review are automated, which cuts down underwriting time. 

Depending on the lending solution, the time from application to funding can be reduced by up to 80% on average.

Smarter Loan Decisions

Digital SME lending solutions use AI-powered risk assessment and fraud detection tools, which lead to more accurate loan decisions that are fairer and unbiased. 

Automated SaaS lending software enhances this process further by determining the best business lending solution to meet the borrower’s needs, whether it’s a term loan, line of credit, working capital loan, or other financing solution. Lenders can also adjust their loan pricing accordingly to maximize profits.

More Accurate Risk Assessments

Automated SME lending solutions collect real-time financial data on businesses and owners. The systems use machine learning to spot early warning signs of a potential default, such as a severe drop in revenue or missed payments on debts. 

By being able to step in and proactively manage the loan, banks can avoid a financial loss.

Better Compliance With Lending Rules

Financial institutions are subject to strict regulatory rules, which protect borrowers and ensure a fair and legal business lending process. Automated systems help lenders stay compliant without slowing down the application process.

The best automated SME lending solutions have built-in functionality that stays current with local, state, and national regulations. They also make it easier to generate reports for auditing.

Platforms with compliance built in also help keep borrower information and financial data safe.

Case Study: TAB Bank Increases Loan Volumes With Biz2X

Utah-based TAB Bank partnered with Biz2X to overhaul its small-to-medium business lending operations. The bank launched a customized platform by Biz2 to meet the bank’s need for a high-volume term loan system that could support its mission to provide underserved SMBs with SME lending solutions that would facilitate financial success for their businesses.

The results were greater than they expected. During the first year, TAB Bank processed over 1,600 new applications, with more than 450 loans decisioned through the platform. The average loan size was $160,000, and the time from application to decision dropped to just 19 days. With faster loan decisions and approvals, the bank was able to serve more clients efficiently.

By embracing automation and digital workflows, TAB Bank boosted its loan volume and strengthened its competitive position.

Lower Costs With Automated SME Lending Solutions 

To become more inclusive and cater to underserved small business borrowers, financial institutions must adopt cost-cutting strategies. Typically, any costs associated with onboarding new clients, underwriting, and funding approved loans are passed on to the client through loan origination costs and other bank fees. 

In underserved communities, these higher costs, higher interest rates, and longer funding times are causing many small business owners to turn to alternative lenders, who are often more inclusive and offer faster funding than banks.

Alternative lenders use automated SME lending solutions and cloud-based platforms. Banks can lower their costs by utilizing SaaS lending software for their SME lending solutions. 

How SaaS Lending Software Lower Costs for Banks

Lending software automates and streamlines workflows, which helps lenders speed up the transition from potential client to borrower. It does this by using data to determine eligibility more quickly, reducing the time spent on unqualified applicants. This results in increased efficiency and lower labor costs.

Automated loan processes also populate financial data and generate scoring systems much faster than a team of analysts working in Excel. And it does so with a higher level of accuracy. 

With a unified platform, bankers, loan servicing teams, clients, and third-party verifications and services can communicate within the platform, further reducing costs. Lower costs mean lenders can offer more affordable SME lending solutions to borrowers.

Furthermore, banks that adopt SaaS lending software can expect lower infrastructure and maintenance costs. Unlike traditional on-premise systems, SaaS platforms are cloud-based, require minimal IT overhead, and offer regular updates that ensure compliance with evolving regulatory standards. 

These cost savings can be passed directly to borrowers in the form of lower fees and more competitive interest rates.

Expanding Reach With Automated Lending

Only 42% of small business owners believe their financing needs have been adequately met, according to Forbes. Many lenders are hesitant to provide financing due to higher default rates. Meanwhile, entrepreneurs may be less likely to apply due to strict eligibility requirements.

As a result, many small business owners are reaching out to online lenders for loans. To compete and regain some of the lost market share, banks can reach more borrowers by automating their SME lending solutions.

By streamlining key aspects of the lending process, lenders can reduce processing times and appeal to a more diverse range of applicants, including communities where conventional credit metrics don’t communicate the whole picture. This enables financial institutions to achieve their financial inclusion targets without significantly elevating risk.

More Inclusive Lending With Embedded Finance and POS Lending Systems

To diversify their portfolios and better serve small businesses, lenders are increasingly turning to embedded finance strategies like Point-of-Sale (POS) lending systems. 

POS lending systems enable banks to deliver real-time, point-of-sale credit directly to merchants and their customers, streamlining access to capital when it's needed.

When combined with other SME lending solutions, POS systems give lenders access to real-time transaction and alternative credit data, such as payment histories, business banking transactions, cash flow patterns, and more. 

Lenders can then base their underwriting decisions on more accurate information, even when applicants lack traditional credit histories or formal financial documentation. 

The result is a more inclusive lending model that supports underserved entrepreneurs while generating new revenue streams for banks.

Competitive Advantages of Platform Lending Solutions

SaaS lending software is transforming the SME finance landscape. Their scalability, flexibility, and seamless integration with core banking systems make them powerful assets for lenders looking to expand their portfolios.

These platforms also leverage advanced analytics and AI to provide insights into borrower behavior and loan performance. Lenders can use this data to understand borrower behavior, improve decision-making, predict loan performance, and identify cross-sell opportunities. 

By investing in automated, data-driven lending ecosystems, banks can sustainably grow a more inclusive and profitable portfolio with SME lending solutions for today’s business owners.

The Bottom Line 

Digital platforms can empower lenders to improve performance and profitability while expanding their target markets to include a more stable and inclusive loan portfolio. 

By adopting an automated SME lending solution, banks can serve more small businesses while maintaining compliance and risk controls. SaaS lending software provides a competitive edge for lenders wanting to compete more effectively with online alternative lenders.

Most importantly, banks can drive true financial inclusion and play a central role in closing the gap for underserved small businesses.

FAQs About SME Lending Solutions

1. Does SaaS lending software work for all types of small business loans?

It can be customized for all your commercial lending offerings, including commercial real estate loans, business line of credit, SBA loans, short-term loans, and even business credit cards.

2. How do automated SME lending solutions increase financial inclusion for small business owners?

Automated lending platforms reduce human bias that can occur with manual underwriting. By improving access to more accurate data during the underwriting process, more small business owners can get approved for the financing they need.

3. What are the primary differences between traditional lending and SaaS lending software?

Traditional lending relies on manual processes and can be time and labor intensive. Saas Lending software automates many of the loan origination processes, including document intake and management, credit and risk assessment, loan approval, and compliance. It’s also scalable, so banks can approve more loans without increasing their risks.

4. Do lenders have to change their core banking systems to use platform lending solutions?

Most modern automated lending systems are designed to fit in with existing banking systems.

5. How can my bank get started with an automated SME lending system?

First, assess its current lending workflows and determine which areas need the most improvement. Then, collaborate with an experienced and reputable SaaS lending software provider or platform lending solutions expert, like Biz2X. Biz2X offers end-to-end onboarding support, training, and customization based on your bank’s lending policies and compliance needs.

To get started with your bank’s customized SME lending solution, reach out to a Biz2X expert today to find the right solution for your small business lending needs.