With over 50% of SME invoices paid late, cash flow can seriously limit small business growth and stop them from finding their feet.
While larger companies can rely on bank loans to manage cash flow, smaller companies are often unable to afford the cost of borrowing a lump sum.
Luckily, some lenders are investing in cutting-edge machine learning to compute vast amounts of data. Rapid approval, fair assessments, and affordable lending rates can give SMEs the financial boost they need to grow.
Join us as we explore the future of machine learning in finance and how tech-driven risk assessments help financial lenders expedite the payment process in the blink of an eye.
The Problem with Old School Lenders
Almost all SME business owners will agree that talking to big banks to raise capital can be a major headache.
Whether it’s overcoming the blow of rejection or forking out for hefty interest rates, it’s easy to feel misunderstood. Many banks forget that the size of a business can affect its financial demands.
Maintaining steady cash flow for SMEs is often a case of pulling money forward to make ends meet during quieter months. SMEs are often concerned with three things:
- No one enjoys being passed back and forth between account managers or jumping through hoops to pass strict risk assessments. Small businesses require a speedy process to get their hands on cash when they need it most.
- When a business is asking for money, they’re in a vulnerable position. The lender holds cash and therefore, power.
- When you’re strapped for cash, the last thing you want is to borrow money that’s going to cost you the Earth in the long-run. SMEs need access to affordable cash that facilitates sustainable growth. A business should never feel punished for borrowing.
How Can Machine Learning Solve These Problems in the Finance Industry?
There are many machine learning use cases in the finance world. Whether it’s automating mundane tasks to increase efficiency or creating sophisticated models to predict demand, intelligent tech is shaping the future of finance.
The key to providing fast, affordable and accurate lending options is to unlock the power of big data.
While traditional banks have access to a lot of market and lender information, they struggle to analyse all the data. Trying to process and analyse this information manually isn’t cost-effective. As a result, they’re unable to make an accurate assessment of their risk and demand unreasonably high interest rates.
Machine learning, on the other hand, can process and analyse more information than a human ever could. It’s ability to quickly and automatically process data means that machine learning tools are also much better at making an accurate decision.
If your business has shown consistent month-on-month growth but is unable to pay a bill due to late payments from a customer, this shouldn’t be something you’re punished for.
Lenders who take the time to understand their customers using big data and machine learning can paint a clearer picture of SMEs’ financial positions. Instead of jumping to conclusions and assuming your business is a high-risk borrower, machine learning systems can assess the whole picture.
Machines Are Faster Than Humans
The processing capacity of an machine learning system compared to a human brain is incomparable.
While an account manager will use spreadsheets and financial reports to make a crude assessment of your business, machine learning uses Siamese neural networks to process thousands of data points.
Siamese neural networks mimics the same learning process of the human brain to make intelligent interpretations about the risks associated with lending to a business.
The best lenders will integrate with your existing accounting software to build an accurate image of your business and deliver an instant approval decision when you apply for cash.
Automation Avoids Bias
A recent report by Deloitte explains how machine learning and big data “allows businesses to quickly tap unstructured information, personalised services, and reduce subjectivity in decision making.”
Instead of an account manager taking a dim view on a business that’s asking for cash, machine learning offers a fair and unbiased assessment to boost your chance of approval.
From a sample of 324,000 SMEs who applied for a loan or overdraft in the UK, 26% were rejected. Shockingly, only 3% of the rejected businesses were referred to other funding sources to get the help they needed.
Technology Can Save You Money
Possibly the most exciting application of machine learning in finance is using big data and predictive modelling technologies to advise SMEs on the best way to manage cash flow.
If your lender has access to your accounts and financial information, they can use machine learning to look into the future and use best and worst-case scenarios to avoid cash flow problems down the line.
Whether it’s flagging a potential dip in cash flow or suggesting a cash advance on an account with recurring late payments, machine learning can learn from the past to help your business build a brighter future.
Finance Your Business with Lendflo
Here at Lendflo, we’re committed to offering SMEs efficient, fair and affordable advances on unpaid invoices.
Our mission is to help businesses of all shapes and sizes to maintain steady cash flow and offer competitive rates to help your business scale.
Experience our smart digital platform to quickly access cash and enjoy full integration with your existing accounting software for seamless transactions.
Are you ready to unlock the power of machine learning to get your hands on the cash you need to grow?
Discover invoice financing today.