Small and midsize enterprises (SMEs) make up over half of the world’s total workforce, but millions are still constrained in accessing credit, creating a global financing gap of $5 trillion. Unfortunately, traditional credit approaches often fail to recognize the potential and viable capacity of SMEs. Agentic AI is changing that.
I recently co-hosted a SME Finance Forum that attracted over 120 leaders from the global small business finance community for a robust discussion focused on how Agentic AI, is transforming the future of SME lending. The roundtable featured industry experts including Bharat Poddar of Boston Consulting Group; Jonathan Fantini-Porter of Mastercard; Ivan Fernandez of Google; Homam Hashem, the CEO of Kafalah; Sharmista Appaya of the World Bank Group; and Qamar Saleem, the Global Head of the SME Finance Forum at the International Finance Corporation (IFC). The major discussion topic was the impact AI is having on the way banks and other financial institutions provide capital to small businesses.
Agentic AI’s Transformative Role in Small Business Financing Today
AI applications can streamline much of the loan process, including underwriting and credit assessment, portfolio management, and customer engagement, while also introducing a higher degree of accuracy in decision-making.
One of the most recent innovations in small business lending is Agentic AI, autonomous software that can manage entire workflows without human intervention. Such technology can automatically review funding applications, check documents, and respond to customers in real time, thereby providing a faster, fairer, and more scalable lending experience.
The question is no longer whether banks will adopt AI, but rather how banks will adapt to AI as the technology learns and becomes smarter and more contextual to business objectives.
10 Ways Agentic AI Is Transforming Small Business Lending
1. Agentic AI Adaptation
In the early years of AI in lending, the focus primarily centered on AI adoption. The next phase of innovation will be characterized by AI adaptation, rather than simply AI adoption. As AI technology continues to gain context and autonomy in its methodologies, financial services organizations will need to stay ahead and pivot to new digital opportunities.
The future small business AI ecosystem will allow for all-encompassing support and seamless digital experiences. AI assistance in liquidity management, cash flow forecasting, and predictive business insights will become new norms.
2. Agentic AI Is Transforming The Way Lenders Conduct Credit Ratings
Traditional credit rating systems use a limited amount of historical financial data as indicators, while overlooking the operational nature of a small business. AI expands that lens by looking at a variety of structured and unstructured data types, such as sales trends, supplier relationships, social sentiment, and even macroeconomic signals.
This approach generates a much more comprehensive and dynamic credit profile, which helps lenders identify borrowers who may have fallen through the cracks under old, rigid criteria. Together, this improves lenders’ portfolio quality and offers greater financial inclusion for the small business sector.
3. Intelligent Automation Is Turning Loan Approvals Into Real-Time Experiences.
Rather than taking an extensive amount of time to collect and verify documents through human underwriting, automation processes loan requests within minutes. Machine learning models can seamlessly check data provided by the applicant through external data sources, thereby identifying deficiencies and ultimately approving the loan at a certain confidence level.
This results in a more efficient process for banks and a better experience for the borrower. Small business owners will have more time to focus on growth rather than the logistics of finalizing paperwork, while freeing up internal teams at financial institutions to work with borrowers and build relationships.
4. Agentic AI Hyper-Personalization Is A Powerful Differentiator.
Agentic AI enables lenders to shift from standard lending products toward personalized products that evolve with each SME’s needs. Based on transaction-level data, seasonal sales, and industry challenges, AI can recommend and personalize loan structures, repayment options, and credit line adjustments for specific customers.
Personalization deepens trust in the lender, builds long-term customer relationships, and increases retention. It transforms financial service companies into growth partners instead of just transactional relationships.
5. Agentic AI’s Predictive Risk Intelligence Allows More Proactive Portfolio Management.
Rather than only responding after defaults occur, AI and predictive analytics identify early indicators for banks that support portfolio performance. Some of these indicators include worsening trends in revenue, issues in the supply chain, and changes in payment patterns. Risk managers can then act proactively.
By leveraging historical data to enhance predictive analytics, lenders can refine their credit underwriting standards, more effectively balance risk exposure, and even help borrowers who are in distress prior to default turning into loss, all of which enhances a bank’s balance sheet and supports the stability of a borrower’s business.
6. Agentic AI Levels The Competitive Playing Field For Smaller Lenders.
Cloud-based AI lending platforms provide accessibility to advanced analytics and automation tools without the exorbitant investments banks once needed for implementation. Community banks, regional players, and fintechs can now compete on equal footing through scalable AI platforms that enhance underwriting accuracy and speed.
Technology’s democratization gives smaller lenders access to the same tools as larger financial institutions, helping to stimulate local economic growth and expand the financial ecosystem.
7. Responsible Agentic AI Builds Trust And Long-Term Loyalty.
Lenders prioritizing transparency by disclosing how algorithms determine results and monitoring for unintended discrimination build stronger reputations and regulatory trust. Incorporating human review, explainable and auditable AI practices, and solid governance systems ensures fairness in automated processes rather than undermining it.
Upholding standards of responsible AI is not just a regulatory requirement; it’s a brand and customer loyalty playbook for long-term success.
8. The Confluence of Agentic AI Technology And Human Insight Is The Future Of Small Business Finance.
Despite AI’s analytical capabilities, lending remains fundamentally human and based on relationships, human judgment, and trust. The most successful lenders will blend authentic human interactions with machine precision.
AI, meanwhile, can provide valuable insights, modernize workflows, and guide recommendations. Professionals can, then, devote their time to building long-lasting client relationships and intervening in more complex cases. This formula will set new standards for responsiveness, customer experience, and sustainable growth in small business lending across the globe.
9. Women Entrepreneurs Face A Unique And Persistent Credit Gap That Must Be Addressed.
Despite progress in gender equity, women entrepreneurs still face credit barriers. Research showed that U.S. women business owners have credit scores 30 to 40 points lower than men on average.
Women also tend to work in industries that generate lower revenues and have a higher perceived risk. On the other hand, the forum also shared that women-led businesses are maintaining strong margins and financial discipline.
Related: Women-Owned Businesses Received More Loan Approvals, Higher Amounts In 2024
AI can help reduce the gender credit gap, along with policy frameworks that prioritize inclusive lending practices.
10. Agentic AI Is Reshaping The Future of Small Business Lending.
Agentic AI systems take automation to a new level by operating an entire end-to-end lending workflow autonomously. They act as a 24/7 intelligent agent, making assessments of applicants, authenticating documentation, and providing customer service in real time. The outcome is a lending process that results in faster decisions with dramatically greater consistency and fairness.
For small businesses, this means access to capital is no longer constrained by business hours or manual inspection cycles. Lenders leveraging Agentic AI can scale their operations rapidly through more accurate decision-making.
As the financial services world embraces this next digital frontier, Agentic AI offers a new way of embedding inclusion, efficiency, and trust into SME finance. Successful adoption of Agentic AI hinges upon robust infrastructure, quality data, digital skills, and responsible policy frameworks lead to successful AI adoption for financial institutions. Together, they create the foundation for ethical AI integration.
Related: AI Is Transforming Small Business Finance, Closing Global Funding Gap
What’s Next For Agentic AI in SME Lending?
Agentic AI and adaptive AI systems that constantly learn and personalize SME finance journeys will revolutionize how businesses borrow cash, manage liquidity, and thrive sustainably. Leading financial institutions will have AI systems that go beyond the adoption of AI technology and are designed to adapt to newer innovations.
Although people have suggested that AI will diminish the need for human intervention in SME lending, quite the opposite is true. In fact, the most effective AI in lending solutions utilizes both technology and human oversight to maximize loan efficiency, speed up decisions, and manage risk. AI should never replace humans in banking and underwriting. Its primary purpose is to streamline operations and strengthen decision-making.
No single entity can close the SME credit gap alone. Partnerships between banks, fintechs, and third-party providers are essential to building the infrastructure, trust, and innovation needed for inclusive finance.
SME finance is on the cusp of a digital transformation, where Agentic AI and human insight converge to redefine access, efficiency, and inclusion.
Agentic AI is not simply optimizing small business finance; AI is transforming it. The next evolution of AI will make lending faster, fairer, and more human-centric than ever before.
