AI and Finace: Is it a numbers game?

Mar 14, 2024 2:40:10 PM

"Entrepreneurs behind high-growth businesses use “capital” as a catch-all phrase for funding but a good CFO can help you navigate different types of funding while contextualising the business to lenders."

By Candice Marques (Bizcash), Cuan Hopley (Bizcash) & Rowan De Klerk (CFO Centre)

Access to finance remains a very real challenge for high-growth businesses in South Africa, but at the same time does every company fully understand the types of funding solutions that are available to them? Can Artificial Intelligence (AI) bridge this gap or is Human Intervention (HI) still required to successfully secure funding?

Entrepreneurs behind high-growth businesses use “capital” as a catch-all phrase for funding but a good CFO can help you navigate different types of funding while contextualising the business to lenders. In an environment where interest rates are rising, supply chains are under pressure and entrepreneurs are needing to draw on every inch of resilience in their being, we’ve unpacked some of the key considerations for applying for funding.

Algorithms are one thing but who is the master of your financial data?

While there are a number of fintech platforms in South Africa who are improving access to finance, many of these are formula and algorithm driven with a focus on short-term cashflow.

A quality CFO is not only able to ensure that your compliance and financial data is in an appropriate format that reflects historical matters, they are also able to put together cashflow forecasts and management accounts that lenders will require in their decision making process.

The CFO can have the difficult conversations

Many entrepreneurs who are looking to access funding are not aware that their own credit health is a key consideration for lenders. How you run your personal finances is a determinant in how you are going to manage a loan that is extended to your business.

COVID-19 was an incredibly challenging time for entrepreneurs who often had to access their own personal balance sheets, personal loans and savings to keep their businesses afloat. Just as the economy had begun to recover, we have seen pressure from rising interest rates being exerted.

An experienced CFO is able to have this very personal discussion with the executive leadership and directors of a business and guide them around how they present themselves.

Know the type of funding you are looking for

As an entrepreneur, you are aware that you need capital to facilitate growth. But do you know the difference between Invoice Discounting, Supply Chain Finance, a Term Loan, an Overdraft Facility and a Business Loan?

In all likelihood, you probably require a combination of facilities to help you navigate your monthly cashflow requirements but, do you have the time to identify what you need and when?

CFOs are able to speak “the language of finance” and can identify the most cost-effective solutions for the business. For a lender, this de-risks the process and lowers the cost of funding for the business.

If you think it is expensive to hire a professional and AI can do everything…

There is an old adage which says: “If you think it’s expensive to hire a professional to do a job then wait until you hire an amateur” and we believe this is incredibly relevant when it comes to the access to finance discussion. Short, medium and long term debt all have different requirements, interest costs and credit scoring criteria. If poor quality information is submitted to funders the simple answer is to decline the application. So you have one shot at making the right impression.

AI remains input driven and need human intervention to contextualise and strategise accordingly.

The entrepreneurs behind growth businesses want to be able to focus on the activities they enjoy while lenders want to know that the entrepreneurs they back, have the systems and controls in place to deliver a low-risk lending environment. Although AI is becoming more involved in the process of allocating funding, experienced human intervention is imperative to ensure you feed the right information into your application to have your application approved. If you are serious about accessing funding for your business then give serious consideration to understanding that applying for funding is more than just a numbers game.

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