Overcoming challenges that small and minority-owned businesses face when accessing financing.

3 min readFeb 28, 2023


Small businesses are the backbone of the economy, yet many of them struggle to obtain the financing they need to start and grow their businesses. According to recent data, a significant percentage of small business financing applications are either partially or completely rejected, which highlights the need for better access to financing options and improved efficiency in the screening and evaluation process.

The National Small Business Association conducted a survey in 2022 which found that more than one-third of small businesses (37 percent) say they are unable to obtain adequate financing.

These statistics are alarming and suggest that there is a significant number of small businesses that are unable to access the financing they need to start or grow their businesses.

The reasons for rejection varied, with creditworthiness, lack of collateral, and insufficient cash flow being among the top reasons. Fortunately, there are alternative financing options available to small businesses. Asset-based lending and invoice factoring, in particular, have emerged as popular choices for businesses that are unable to secure traditional loans.

Asset-based lending allows businesses to borrow against their assets, such as inventory or accounts receivable. This type of financing is particularly useful for businesses with valuable assets but limited cash flow. With asset-based lending, businesses can unlock the value of their assets and use the funds for a variety of purposes, such as funding growth initiatives or covering operational expenses.

Invoice factoring, on the other hand, allows businesses to sell their unpaid invoices to a third-party company in exchange for immediate cash. This can be a valuable solution for businesses that are waiting for clients to pay their invoices but need cash flow in the meantime.

Frustratingly, small and minority-owned businesses have historically faced similar challenges in accessing financing from alternative and secured financing purchasers and lenders. The difficulty lies in the underwriting process that requires rigorous documentation and the manual assessment of financial data. This challenge has created a perception of conflict between the return on investment for secured finance companies and the effort needed to screen and underwrite small loan amounts.

Fortunately, advancements in technology are making it easier for small businesses to access financing. Such as the use of machine learning algorithms to streamline the underwriting process for loans of any size i.e. Harbr’s AI-powered platform which can analyze the creditworthiness of small businesses and their debtors in real-time and en-masse.

Our advanced machine learning algorithms can evaluate various data points, such as bank statements, credit scores, aging reports, and transaction history, to determine a small business’s risk profile. This technology also allows for quick screening of factoring and loan applications, meaning that small businesses can access the funding they need in a shorter amount of time.

The use of Harbr’s technology can also mitigate bias in the underwriting process, a problem that has historically affected small and minority-owned businesses. By automating the underwriting process, the technology reduces human intervention and, in turn, the potential for discrimination based on factors such as race, ethnicity, or gender.

Harbr works closely with the secured finance industry to develop user-friendly and powerful product experiences aimed at addressing the challenges that small and minority-owned businesses face when accessing financing.

Sources: National Small Business Association Survey: 2023 Economic Report.

Photo by Tim Mossholder on Unsplash




Harbr provides AI-based document evaluation, data extraction, and decisioning insights as a fully protected integrated service.