American small businesses are being tested. Despite making up nearly two-thirds of net new jobs over the past two decades and contributing about 40% of the nation’s GDP, small businesses still lack access to healthy, affordable financing. Entrepreneurs face an uphill battle finding fair and timely credit options. Local manufacturers, independent restaurant owners, contractors and countless other creatives are struggling to find the funding they need to grow and drive our economy forward.
Three quarters of small and mid-sized businesses report that access to affordable credit has directly hurt their operations. Heightened interest rates and tightening credit standards compound the issue, leaving many entrepreneurs unable to secure the funds they need to invest in new equipment, expand their teams, or manage cash flow effectively.
The challenge is traditional bank loan approvals can take weeks or even months to go from application to access to funds. This experience is frustratingly outdated in a world where consumers are used to convenience and near-instantaneous transactions. Instead, a florist might wait an anxiety-ridden two months for approval to replace a broken delivery vehicle, or a restaurant may be forced to close until they can finance a new pizza oven.
Alternative and sometimes predatory lenders are tempting, offering a promise of quick approvals often at a steep cost, with higher rates, shorter repayment terms, and less transparency. The risks are significant, especially for the many borrowers who lack financial cushions. Yet, some take the gamble instead of investing seemingly endless hours submitting their financial details only to be turned down weeks later by a bank. The process is painful, and not what any small business owner wants to focus on.
This broken banking system needs to change. Small business offers a huge market opportunity for bankers, but they need technology that rivals that of alternative lenders in order to support entrepreneurs and local economies. Community banks have the trust, relationships, and shared local values that align closely with small business owners, they are primed to own this business if they could only offer easier, timely experiences. The solution isn’t to mimic the models of non-bank competitors, but to leapfrog the competition: to eliminate delays and friction while offering reputable, trusted rates and services.
This calls for the next generation of lending infrastructure. Traditional bank legacy loan origination systems were built 15 or more years ago for entirely different lending markets, when digital experiences were in their infancy. Their experiences can involve hundreds of steps, dozens of forms, and constant back-and-forth with underwriters. The complexity, compounded with only a chance of approval and the daunting need to start over again, has been a deterrent to many entrepreneurs. Entrepreneurs may hold deposit accounts and personal accounts at their local bank, but they are borrowing elsewhere.
Much of the current conversation around AI in finance focuses on future promise, but for lenders and borrowers, the real question is what works today in production environments. AI offers a path forward for bankers, not as a theoretical upgrade, but as a practical tool already being deployed to remove bottlenecks. They can now streamline document verification, data entry, and fraud checks to reduce processing times from weeks to days, or even hours – and all while staying true to their standards. Lenders can process financial statements, tax records, and credit reports in minutes, and then add in a human touch to ensure their quality and address unique situations.
AI should be implemented as a complement to human judgment, not a replacement. Lending is personal, and community banks thrive on trust and relationships. To be effective, AI must be applied with transparency, explainability, and fairness built into every model and workflow. Regulators and borrowers alike will demand clarity on how decisions are made, that’s table stakes.
There is also a growing recognition that responsible AI deployment requires rigorous testing, monitoring, and governance, particularly in regulated industries like banking where the cost of error is high. The good news is that these more effective decisioning practices will also mean better access to credit for underserved groups, such as minority-owned, women-owned, or rural businesses that often fall through the cracks of traditional processes. These business owners have often worked harder to get where they are, and are driven with ideas that are making a difference. Balancing them into a bank’s portfolio will not only strengthen and diversify the portfolio, but also the economic vitality of the communities they serve.
In 2024, the SBA reported more than 100,000 new small business financings, a 16 year record. The capital impact of those loans reached $56 billion. Early 2025 indicators predict this figure will only continue to climb as more entrepreneurs seek funding to launch, scale, and sustain evolving operations. The most successful lenders will be those who use AI to make faster, fairer, and more consistent decisions, while keeping humans at the center of the process.
Some lenders are already seeing meaningful gains, with AI-enabled workflows cutting manual review work dramatically and accelerating decisions by an order of magnitude compared to traditional processes. Banks can deliver loans quickly enough to meet pressing business needs, helping entrepreneurs manage cash flow, invest in growth, and respond to new opportunities with confidence. Accelerated funding also frees loan officers to focus on advising customers, structuring loans, and building relationships that strengthen loyalty.
With responsible and ethical AI, community banks can reclaim their position as the preferred partner for small business lending, delivering capital in a way that is both fast and sustainable. They can build a healthier, more inclusive financial system for the small businesses who keep local economies strong.
