The trend for using technology to handle financial matters has long been desirable for small businesses who use everything from REI skip tracing to track down defaulting debtors to accounting software like QuickBooks to automate their accounting, and now companies are increasingly opting for AI loans when they need a cash flow injection.
The fact that AI loans take a lot of the time and effort out of applying for business finances is a big draw for many entrepreneurs like Xiomara Rosa-Tedla who needed a cash injection in order to advertise her business, Unoeth, on social media. She did not want to have to go through the hoops of asking the bank for a loan, nor did she want to sell a significant chunk of her business to venture capitalists in order to raise the money she needed, so she opted to apply for an AI loan from Clearco.
This was a smart move for Xiomara, who, within just a few minutes of making an application, was offered between $5,000 – $18,000 of funding just by answering a few simple questions digitally. At no point in time did she have to speak with an actual human, which sped up the process significantly and made accessing the cash flow she needed as stress-free as possible.
Clearco is just one of many finances companies that offer small business loans with almost no human interaction, for the most part, In 2020 alone, they delivered more than $2.5 billion in essential business loans to over 5,500 companies, using nothing more than AI algorithms to decide who could access their loans, how much money they could access and what the repayment terms would be.
To people who are used to doing things the traditional way, this may seem like a risky model for financial companies to employ, but these days, the algorithms used by such companies are so sophisticated that it is no riskier than having a human check an application, and in fact, it could be less risky due to the fact that the human error factor has been largely removed.
It is not surprising then, that companies like Paypal and Square have also started to offer small businesses via artificial intelligence. These particular companies have enough of an insight into their clients’ finances, due to being some of the biggest business payment providers, that they can very accurately work out which companies are likely to pay them back, and how much they can afford to borrow, without ever speaking to them in person. That being said, they do still have some staff who are employed to make manual checks on credit applications that exceed a certain threshold.
Although AI loans are quickly gaining in popularity, there is still not enough data to accurately access whether their recipients are more or less likely to default that the acreage, but all signs point to the fact that AI loans are nevertheless here to stay.