Why digitization will transform the small business economy under Trump

Every time a new president is inaugurated, he brings with him a new perspective and the promise of change. Such will be the case in less than a week when Donald Trump returns to the White House. The former president and billionaire businessman campaigned on “fixing the economy” and promises a new focus on American energy, deregulation and a business-friendly atmosphere.

“Washington is open and the United States economy is open. The post-financial crisis era of regulation, lawmaking and policy is dead and gone,” said Patrick McHenry, former North Carolina congressman and chairman of the Financial Services Committee. of the House of Representatives. in his keynote address at the Frontiers of Digital Finance Conference at the University of Miami on Tuesday, January 14.

McHenry expects the Trump administration to work toward cutting spending and reducing the national debt to help get the country back on track financially. The president and his team will have a lot of work to do after a Treasury Department report that the US budget deficit rose to a record $700 billion in the first quarter of the fiscal year, up from $510 billion in the same period. last year, an increase of 39%. Total expenditures were $1.8 trillion, while revenues were $1.1 trillion, resulting in a deficit of $700 billion.

Among the expenditures: the government spent $308 billion on debt interest in the first quarter of FY2025.

· Spending increased by 41% ($9 billion) at the Department of Homeland Security, most of it due to FEMA spending on hurricane and disaster relief.

· Spending at the Department of Veterans Affairs increased by 13% ($11 billion) due to an expansion of benefits for veterans.

· The EPA also spent an additional $21 billion so far this year to release its greenhouse gas reduction funds, and

· Social Security costs are up 6% so far this year.

“Without structural changes in the way we spend money in Washington, we will suffer a severe consequence,” McHenry said. “The last time we had a wholesale remake of our federal government was in 1920. We have a federal government that is beyond our capacity to pay for it at its current size.”

He also believes that digital finance will play an important role in addressing the country’s financial challenges.

Related: The rise of Fintech and Banking Partnerships will benefit small businesses

“If America is to remain at the top of our game economically, we must keep pace with the digitization of our world,” McHenry said at the FDF Conference. “We need to ensure we are equipped to deal with changing formats, especially in financial services, with the deployment of artificial intelligence.

Benefits of Digitization of Finance

Digitization has revolutionized small business financing by expanding access to capital and streamlining the process. In the pre-digital banking world not too long ago, small business owners looking for funding had to visit banks, sit down and meet with a loan officer, fill out a lot of paperwork, and then hope for approval , which can often take weeks to receive – if at all. The experience can be intimidating and frustrating, especially for minority entrepreneurs who had language barriers or who may not have had much experience dealing with the American banking system. If a loan application was rejected, the business owner would have to go to another bank and repeat the experience all over again.

The ability to apply for financing online and submit supporting documents, such as bank statements, P&L and tax returns, via computer or smartphone made securing capital easier and more convenient than ever before. In fact, the filings are often made at night or on weekends, when business owners have more time, but bank branches were closed. Lenders who embraced the technology began using algorithms to evaluate applications faster than ever before, cutting approval times from weeks to days—and sometimes just hours.

Banks, especially larger institutions that often looked after their customers, often had strict lending parameters and were less willing to take risks. This opened the door for smaller banks and non-bank lenders who were willing to lend money to borrowers who might not meet the tighter lending standards of the big banks. Alternative lenders were willing to provide capital to borrowers that traditional banks rejected. Thus financial technology (fintech) has expanded access to capital.

Digitization and Artificial Intelligence (AI) It’s taking small business financing to the next level

Today, Artificial Intelligence (AI) has transformed the lending industry by enabling faster, more accurate and efficient decision-making processes. AI can analyze large amounts of data, including credit scores and data such as utility bill payments and rent payments, to determine a potential borrower’s creditworthiness. AI looks beyond credit scores and examines spending habits, transaction history and behavioral data to predict a borrower’s likelihood of repayment, the primary concern of any lender. By analyzing multiple data points, AI enables lenders to assess risk while helping borrowers with poor credit history access capital.

AI makes lending more efficient because it can use inconsistent or suspicious data to flag fraudulent applications. Additionally, Optical Character Recognition (OCR), a technology that converts data images from documents – such as payslips and tax returns – into a machine-readable format, speeds up the application review process. Because AI algorithms can analyze the credit risk of loan applications almost instantly, decisions are made faster and with less manpower than ever before. Further, AI can calculate credit limits and make tailored lending offers based on a company’s most recent financial activity.

Understandably, AI has caused some concerns about eliminating jobs in the short term, but in the long term, AI can be a great job creator for new markets and new opportunities.

“We’ll be able to do things in a decade that we could never have imagined. In the long run, it’s a winner,” McHenry said. “I’m optimistic about the deployment of AI… It’s a game changer. America is well-equipped to take advantage of these opportunities and be at the forefront of deploying and deploying AI systems. AI, especially in our more regulated spheres.”

Related: How small businesses can survive the Trump Presidency

President Trump has signaled his focus on government efficiency by putting Elon Musk and Vivek Ramaswamy at the helm of DOGE, promoting American businesses and supporting technological advances, such as cryptocurrency and the digitization of business lending. Reducing the national debt will be a major challenge, but it can lead to lower interest rates, increased access to capital and economic growth.