AI technology can make SME lending ‘simpler, quicker and cheaper’ – Spark Finance

The firm claims to be the first to have done so and hopes this technology will improve the lending journey for SMEs. 

Spark Finance started building the technology in 2021 to support its database which holds information on five million businesses in the UK. The data is collated from 30 sources including public data, HMRC as well as import and export information. 

Nick Adamou, marketing manager at Spark Finance, said the company’s founder set on this path after realising that despite the advances being made in technology, it was not being used enough in the lending space. 

Spark Finance was founded by Julian Dobbin, who has almost 30 years of experience in the financial sector.  

“From the outset, we asked ourselves ‘how do we evolve tech?’. And this was across the board, from top of funnel to placing debt with an SME,” Adamou said. 

Spark Finance’s technology creates a picture of a business’ financial state which can then be used to support lending decisions. It shows a company’s financial history and estimates how much it can borrow from a lender. 

Earlier this year, it merged with commercial brokerage JD Capital Finance, which Adamou said was helpful as the firm could now “own the user journey from front to back”. 

He said JD already had “great relationships” with lenders so being able to connect to the market through the firm was a “massive win” for Spark Finance. Adamou said the volume of business conducted through the brokerage also helped the company to test its process. 

This allows the firm to put its resources in the right places, Adamou said, which is particularly important for a small company with a small development team. 

“It’s important we build the right things at the right time,” he added. 

Why AI? 

Adamou said Spark Finance used the capabilities of AI “before it became a fad”, adding: “What AI can do is pretty incredible.”  

He said the credit paper produced would typically take an underwriter up to a day to put together, but the technology meant this could be done almost instantly. 

“With AI, you still get the same end result but for a fraction of the time and cost,” he added. 

Adamou said this would speed up decisions and identify what was available to SMEs while helping lenders understand the financial position of a company without going through multiple steps. 

He added: “That will make lending cheaper because there are fewer people needed in that journey and less time spent. The money saved can be used elsewhere. It’s about making things simpler, quicker and cheaper. That’s where we want to get to, that’s the end goal.” 

Adamou said SMEs were underserved by technology and anything that could improve that would be beneficial. 

“SMEs are the backbone of the UK, so we need to make sure we’re making their lives easier.” 

Common use of tech 

Adamou said Spark Finance wanted to get to a place where businesses were provided with instant quotes for finance. It also sees its tool being used as a “financial-led database for the UK”. 

The credit paper process is “pretty much instantaneous”, Adamou said, and the accuracy is improving to the point where the firm was nearly ready to roll the technology out. 

Adamou said this was likely to happen in the autumn and it would be issued to lenders. Spark Finance is already working with a few, and the feedback has “been amazing”. 

Going forward, Spark Finance wants to raise money to expand its team and market its proposition. It also wants to continue working with lenders to get feedback from customers and streamline other parts of the journey. 

Adamou said: “There’s no reason why tech shouldn’t be doing these things and replacing some of what we do. We see it in other industries so there’s no reason why this can’t be next.” 

He added that changes in the financial sector tended to take a while because people’s finances and money were important, so there was a need to be careful.  

However, he added: “It’s definitely happening, it might not be happening as fast as some of us would like, which can be a bit frustrating. but it is happening. The lenders and banks are becoming more aware. It’s a step in the right direction but we’ve got a long way to go.” 

Adamou said it was inevitable that digitisation would happen because the capability of AI could not be replicated.

He continued: “People will definitely start to embrace it. It may take a couple of years before it’s embedded into all financial practices, especially mortgage lending as that’s still a manual process in many ways, but it is coming. Not just in finance but for every industry.”