Main Street Monday: SBA Predicts AI Cuts Small Business Costs by 10–20% While Driving 5–15% Payroll Growth 

by Bob Coleman

Founder & Publisher

Will artificial intelligence replace workers or create more jobs for small businesses? Last week’s report from the Office of Advocacy, SBA Research Spotlight: AI in Business — Small Firms Closing In provides a clear answer: for Main Street, AI is cutting costs while expanding payrolls.

Productivity Gains Drive Hiring, Not Cuts

The SBA Office of Advocacy’s report shows that small firms using or planning to use AI are more likely to anticipate increased hiring than workforce reductions. When businesses in price-sensitive markets boost productivity, they can serve more customers at lower cost, capture market share, and grow. That growth almost always requires more hands on deck for Main Street firms with less than 19 employees.

This challenges the common belief that AI is purely labor-saving. For many small firms, AI is a growth catalyst — unlocking efficiency that allows them to expand operations and payroll.

The Numbers Behind AI Savings

Research across small and mid-sized enterprises confirms the cost and productivity potential of AI. For Main Street businesses, the numbers are striking:

• Marketing & Customer Outreach: AI-driven targeting and content creation cut campaign costs by 15–25%, while boosting customer acquisition. Example: an e-commerce boutique saves $30,000 annually on marketing spend.
• Back-Office Efficiency: Automating scheduling, payroll, and invoice reconciliation trims 10–15% of administrative costs. Example: a 20-person HVAC firm reduces admin expenses by $40,000 per year.
• Labor Productivity Gains: Staff using AI tools see 20–30% improvements in efficiency, allowing firms to scale output. Example: a bakery increases throughput 25%, but must hire more employees to meet demand.
• Risk & Compliance Savings: AI in fraud detection and compliance monitoring reduces losses by 5–10% annually. Example: a medical billing startup saves $75,000 in rejected claims but must remain vigilant about HIPAA compliance.
• Net Payroll Impact: Despite automation, the SBA data shows most small firms expect 5–15% increases in payroll as growth forces them to hire. Example: a local retailer adds eight employees after AI-driven online orders surge 40%.

What This Means for Lenders

For SBA lenders, AI adoption among borrowers creates a twofold impact:

1. Short-term pressure: Firms may need larger working capital lines to cover payroll as they ramp up staff to meet new demand.
2. Long-term opportunity: Once AI efficiencies stabilize, cost savings and revenue growth strengthen repayment capacity and credit quality.

AI adoption isn’t just a technology story — it’s a cash flow story. Lenders should ask borrowers how AI will affect staffing, operations, and whether they are budgeting for both the savings and the added labor costs.

Bottom Line

AI is no longer just for Silicon Valley giants. Main Street firms are adopting it to run smarter marketing, streamline back offices, and improve customer service. The result? 10–20% cost savings alongside 5–15% payroll growth.

For small businesses, AI isn’t eliminating jobs. It’s fueling expansion. And for lenders, that means underwriting the future will require understanding not just how firms adopt AI, but how they scale their people to match.

View full Office of Advocacy report here.

Considerations in Recommending a Life Insurance Provider to Business Borrowers

by Ben Koplan

CLU, CFP®, LifeEase

A life insurance policy with an executed collateral assignment is often among the last requirements standing between your borrower and their business loan funding. Meeting SBA loan insurance requirements in 2025 demands familiarity with revised documentation rules and digital platforms designed for speed and compliance. Recent changes to SOP 50 10 8 have shaped a new process for eligibility, equity injection, and collateral protection, making the right insurance partner more critical than ever.

Why Specialist Providers Are Necessary—Now More Than Ever

Some borrowers may still consider relying on a local agent. However, traditional approaches—such as manually sourcing policies through agents who only represent a single insurer—significantly delay SBA loan closings. While local agents excel in personal coverage, they rarely have the infrastructure, digital connections, or SBAspecific expertise needed for urgent business lending requirements. In 2025, specialty SBA insurance providers, most notably, LifeEase Business Insurance Solution, can secure term life policies and complete collateral assignments in as little as a few days, especially for healthy applicants and moderate loan amounts.

What’s Changed in 2025

Key SBA policy changes effective June 1, 2025, instead all key persons must be covered by adequate life insurance, with collateral assignment, for both 7(a) and 504 loans.

Highlights include:

• Life and hazard insurance requirements reinstated for all loans where appropriate.

• Stricter ownership and citizenship standards for all business owners, limiting eligibility to U.S. citizens and lawful permanent residents.

• Minimum equity injection of 10% for startups and ownership changes; only a portion can be fulfilled by seller debt on full standby, with new verification rules for equity sources.

• The minimum SBSS score for expedited small loans has increased to 165 out of 300, narrowing automatic eligibility.

• Reintroduction of tax transcript verification, hazard insurance for assets over $50,000, and standardized documentation at closing.

Digital Tools and Real-Time Tracking

As the leading SBA insurance provider, LifeEase offers cloud-based portals and automated assignment tools. Borrowers and lenders now have instant visibility into every step, from quoting and application through final collateral assignment. Automated notifications, digital forms, and integrations with lender systems reduce human error and prevent last-minute delays. Recommending a provider with these capabilities is essential for speedy, compliant loan processing… 

Read full LifeEase white paper here.

Learn about LifeEase here.

Coleman’s SBA Franchise Risk Grade Report — $295 Per Report

The Coleman Franchise Report is the only franchise intelligence tool built specifically for SBA loan underwriters. Packed with up-to-date SBA loan data, FDD analysis, and impartial Coleman Franchise Risk Grades, it delivers the transparency and confidence underwriters need to make better lending decisions.

This report is tailored to your specific needs and evaluates franchises using key SBA criteria, saving you countless hours of research. Empower your underwriters with precise, reliable data and our simple Grading Scale (AAA to F), helping you determine the viability of a franchise with confidence!

Read more and order here

Spotting Borrower Fraud and Reporting to SBA’s OIG, as Required by Law — Webinar 10/1

SBA has made fraud prevention a top priority for 2025 under the new administration. Fraud enforcement is now front and center, and lenders are expected to take swift and decisive action when they see suspicious activity. The SBA has been very clear that fraud reporting is no longer just a compliance measure; it’s a federal mandate.

Coleman award-winning webinar instructor Lance Sexton will walk you through every borrower action that triggers a mandatory fraud referral. He will explain exactly what information you must collect, where to send it, and what your follow-up responsibilities include.

Read more and register here

Avoid the Top Ten Equity Injection Mistakes That Put Your SBA Guaranty at Risk — Webinar 10/22

Equity injection documentation continues to be one of the most heavily scrutinized areas in SBA lending. Examiners, reviewers, and auditors consistently flag the same issues, and lenders who fail to meet the SBA’s exact requirements risk repairs or denials of their guaranty.

In this webinar, former SBA Little Rock Servicing Center Deputy Director Lance Sexton provides an industry-level presentation on equity injection compliance. Lance will cover exactly what reviewers look for, where lenders often go wrong, and how to document equity injection so your files pass SBA and third-party audits without exception.

Read more and register here

Leverage AI Tools to Craft SBA 7(a) Credit Memos — Onsite Workshop in Oakland, CA on 11/18

Bob Coleman will lead a full-day workshop teaching how to use AI tools like ChatGPT and Microsoft Co-Pilot to streamline SBA 7(a) credit memo preparation. Attendees will receive hands-on training, work through real loan examples, and get ready-to-use templates to improve their underwriting process.

The event takes place on November 18 from 8AM to 4PM PT at TMC Financing in Oakland, CA, with a networking dinner the evening before. It is designed for SBA underwriters, credit analysts, lending managers, and bank executives looking to boost efficiency and accuracy. Registration is $795 per attendee, and seats are limited.

Read more and register here

SBA Secondary Market Summit — December 4, 2025

Coleman’s SBA Secondary Market Summit is back for 2025! For our 18th year, we’re excited to partner with the National Rural Lenders Roundtable (NRLR) to bring you two premier events under one roof in Washington, DC. Bob Judge will bring his decades of industry knowledge and expert insight to give us a glimpse of what to expect in 2026. Bob Coleman will moderate and put together the only program that brings together the Big Four of the SBA secondary market: Brokers, Investors, Sellers and SBA.

Early registration for the Summit is now open with a special early bird offer — one seat for just $995 if purchased by August 15. Don’t miss this opportunity to save!

Read more and register here

PREVIOUS REPORTING

Puerto Rico Bank Chairman Pleads Guilty to $13.6M Loan Fraud

George Andreaus Joins AMB, David Mellman Moves to Momentus, Remembering Kathy Horelica

A Coleman Conversation: Todd Hollander

UPCOMING COLEMAN WEBINARS

Spotting Borrower Fraud and Reporting to SBA’s OIG, as Required by Law — 10/1

Avoid the Top Ten Equity Injection Mistakes That Put Your SBA Guaranty at Risk — 10/22

Lending Conference Schedule 2025

NADCO Now – October 14-17 (Ft. Lauderdale, FL)

B2B Finance Expo – October 28-29 (Las Vegas, NV)

Leverage AI to Craft SBA Loan Credit Memos – November 18 (Oakland, CA)

National Rural Lenders Roundtable – December 3 (Washington DC)

SBA Secondary Market Summit – December 4 (Washington DC)