Revenue-based financing
Revenue-based financing

Automated underwriting services are bringing immediate cash flow financing to SMEs

Traditional underwriting processes are not able to serve small businesses with the scale and speed they deserve. Amidst the economic downturn, automated underwriting services can bring fast and affordable cash flow financing to the introducer-client equation.

Immediate cash flow financing is crucial

With events like soaring cost-of-living, supply chain disruptions, and rising interest rates - SMEs need immediate cash flow financing to help them support their business.

According to a report from the World Bank, small-to-medium sized businesses have unmet finance needs of roughly $5.2 trillion a year. While that’s a serious problem for businesses and economies, it presents an opportunity for introducers.

As more and more small businesses seek financing options, introducers are in a unique position to support their clients with technology-driven underwriting processes that can provide fast, flexible, and affordable financing solutions.

How is automated underwriting used in revenue-based financing?

Automated underwriting can speed up every step of the traditional financing process, reducing wait times from 60 days to 60 seconds. Applicants can upload their documents directly online and open banking technology will retrieve financial information securely with strong customer authentication (SCA) measures. From there, AI underwriting algorithms can assess the relevant data in seconds, come to a decision, and present the client with offers they can self-select. Then, the funds are automatically directed to the business's bank account and if at any point human intervention is required to assess an edge case, the system can alert a manual underwriter to step in.

The future of introducer-client relationships

Manual underwriting is slow to process and slow to change. 57% of all SME credit applications are abandoned because they are too difficult to complete. Hence, introducers need to overcome the slow traditional financing process by introducing modern credit risk assessment via minimal documentation, alternative data points, and instant decisions.

Ultimately, when introducers look to traditional lenders to service their clients, their offers are only as good as their underwriting services. Traditional financing relies on a small set of credit metrics to approve funding, however, with the introduction of Open Banking and advances in algorithm design—alternative finance providers are able to offer clients credit risk assessment that’s more reliable and more likely to be approved.

Revenue-based financing also uses a set of wider risk assessment markers such as social media following, online reviews, and alternative sources of revenue that allow more businesses to become eligible for financing. For introducers, that means giving clients a wider array of funding options to choose from, which means more deals and more commission for them.

Key considerations in introducer-client relationships

To better service their clients, introducers need to factor in the following considerations. Automated underwriting can bring advances to: 

Reducing application decision time: Processing times are the single most important factor for SMEs seeking cashflow support. 8% of SMEs say that quick access to funding is their greatest priority when looking for financing, but manual underwriting is the biggest reason why applications take so long to get approved. Financing applications are still very paper-based for SMEs which makes the process slow and inefficient. However, with automated underwriting, the process is entirely digital and can provide multiple offers to clients within 24 hours for self-selection.   

Gaining a rich overview of a business’ credit risk: Automated underwriting also takes advantage of open banking technology that allows the provider to instantly access up to 24 months of credit history for the client. However, since more than a quarter of small businesses are between one and three years old, providing long revenue history is not possible. Here, automated credit risk assessment uses alternative data points such as multiple sources of revenue, website traffic, and customer reviews to assess the business's ability to repay and bring more nuance to the introducer-client relationship.

Seamless tracking and monitoring: Lastly, revenue-based financing solutions come with a host of tools to help introducers and merchants track an application’s progress in real-time. With an automated solution drawing data together and displaying it in one easy-to-navigate dashboard, introducers can offer their clients a seamless, transparent customer journey with updates on which stage the application is in - removing the guesswork and uncertainty for clients completely.

How to automate your underwriting processes?

It’s in an introducer’s interest to see as many funding applications approved as possible, and it is in the SME's interest to get immediate cash flow financing when they need it. But building an in-house solution for automated underwriting is a large and risky investment, and traditional finance providers do not service SME clients at the scale they deserve.  With a provider like YouLend’s, introducers can offer their clients the best range of financing options right away. 

YouLend’s revenue-based financing products don’t base payments on interest rates, but on a proportion of revenue, meaning fewer clients will be deterred by the cost of borrowing. 

For more information about how YouLend can help introducers find their clients the best deals in the best time, request a demo today.

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