The AI Mirage: Why Outsourced Thinking Undermines Small Business Financing

This article examines how AI-generated business plans and pitch decks affect small business financing, including SBA and USDA loan applications and equity raises. It explains how lenders and investors review business plans during underwriting, and why overreliance on generic AI output can weaken credibility when raising capital for a small business.

For founders researching how to raise capital for a small business, Large Language Models (LLMs) like ChatGPT can appear extremely helpful. In a short amount of time, they can produce a document that looks like a professional business plan or investor pitch deck.

However, there is a fundamental trap. Writing the plan was never the hard part. Thinking through the business was. When seeking debt or equity financing, founders are not simply submitting documents. They are submitting judgment, preparation, and credibility. Overreliance on AI may save time, but it can also unintentionally signal that the underlying work has not been done.

Recently, our team has reviewed an increasing number of business plans and investment decks that feel oddly familiar. The grammar is flawless, the structure is clean, and the tone is confident. Yet upon closer review, many of these documents lack substance. They present a polished surface without demonstrating real command of the business.

When a plan relies heavily on generic AI-generated language, it does more than thin out the analysis. It changes how the founder is perceived during underwriting. The initial submission is often the first indication of how a founder approaches strategy and diligence. When the document reads like a lightly edited LLM output, reviewers inevitably question whether the founder understands the business well enough to operate it, manage risk, and respond to setbacks.

This trend has become increasingly visible. Polished narratives often mask shallow industry knowledge, weak cost assumptions, or unexplored risks. Rather than strengthening a financing request, these documents tend to draw additional scrutiny.

1. The Outsourcing of Critical Thinking and Analysis

The true value of a business plan or pitch deck is not the presentation. It is the analytical process required to create it. Developing a strategy forces founders to confront the uncomfortable parts of their business that are easy to avoid when a tool fills in the blanks.

That process requires founders to be honest about the mechanics of the business and its unit economics. It is easy for an AI to state that margins will reach 30 percent. It is harder to visualize how the business actually operates day to day. Where materials are sourced, how services are delivered, how many employees are required, and how much space is realistically needed are questions that cannot be answered credibly without firsthand analysis. Marketing plans must move beyond professional-sounding language and address what will actually generate customers in a specific market.

Founders must also stress-test assumptions and acknowledge risks. Growth projections should be grounded in defensible data, not optimistic industry reports taken at face value. Market size estimates often require triangulation using government data, regional statistics, or other independent sources. Just as important, risks should be identified directly. Supply chain concentration, regulatory exposure, or margin sensitivity should be addressed openly, along with specific mitigation strategies.

Market share assumptions deserve the same level of scrutiny. Revenue growth requires either taking share from competitors or investing heavily to create new demand. Claims of rapid growth without a clear competitive strategy tend to be viewed as unsubstantiated.

When an LLM generates these sections, this thinking process is often bypassed. The output may sound plausible, but it has not been tested against the realities of a specific industry or geography.

2. The Story Versus the Math

One of the fastest ways a plan loses credibility is when the narrative does not match the financial model. This disconnect appears when the vision described in the text creates costs that never show up in the budget.

AI tools contribute to this problem because they do not understand that strategic decisions described in one section must be reflected quantitatively elsewhere. However, these gaps also appear in manually written plans when founders focus more on the idea than on execution costs.

Common warning signs include describing a senior, highly experienced team while projecting entry-level compensation, promising excellent customer service without budgeting for staffing or systems, or forecasting sharp revenue growth without increasing marketing spend. To experienced reviewers, these inconsistencies signal that the founder has not fully worked through what it takes to execute the strategy.

In financing, alignment between the story and the numbers is essential. A plan that demonstrates internal consistency is far more persuasive than one that relies on optimistic narratives unsupported by math.

3. How AI Should and Should Not Be Used in Business Plans and Pitch Decks

To be clear, the issue is not the use of technology itself. We use LLMs in our own work regularly. The distinction lies in how they are used.

AI can be effective as a tool for refining language, improving clarity, or testing alternative perspectives. It can help ensure that complex ideas are communicated clearly and professionally. What it cannot replace is original analysis, judgment, and decision-making.

In our practice, the ideas, conclusions, and data-driven insights originate with us. AI is used to polish the presentation of that work, not to generate it. When the thinking is outsourced to the machine, the final document loses depth and authenticity.

4. Why Lenders Evaluate Understanding When Reviewing Business Plans

Whether pursuing an SBA or a USDA loan or pitching private investors, it is important to remember that lenders fund understanding and credibility, not paperwork.

The underwriting process evaluates more than financial projections. It assesses whether the founder understands why the business works, how risks are managed, and what differentiates the company in its market. AI-generated plans often fall short because they rely on generalities, avoid precise numbers, and gloss over real-world constraints.

5. Perception Matters More Than Intent

When a submission is clearly AI-generated, reviewers are forced to interpret what that says about the founder. Internally, this is often seen in one of two ways. Either the founder does not recognize how generic the document appears, or they assume the reviewer will not notice. Regardless of intent, neither interpretation helps build trust.

Credibility is fragile during underwriting. Once judgment is questioned at the document level, every assumption and data point receives heightened scrutiny.

Financing decisions ultimately come down to trust. That trust is built through demonstrated understanding, original thinking, and thorough preparation. Technology can improve efficiency and clarity, but it cannot replace accountability or judgment.

Founders who do the hard thinking themselves consistently stand out. A well-prepared plan that reflects real diligence signals readiness for capital far more effectively than any polished narrative generated without substance.

Frequently Asked Questions:

1. Can AI be used to write a business plan for a small business loan?

   AI can assist with editing and organization, but lenders expect founders to demonstrate firsthand understanding of their business. Plans that rely too heavily on AI-generated content often face additional scrutiny during underwriting.
   

2. Do lenders accept AI-generated pitch decks?

   Lenders and investors focus on credibility and substance. Pitch decks that appear generic or lightly edited from AI tools can raise concerns about preparation and due diligence.

   
   

3. How do banks evaluate business plans during underwriting?

   Banks evaluate whether the assumptions, financial projections, and strategy reflect a realistic understanding of the business, its risks, and its operating environment.

   
   

4. What makes a business plan credible to investors?

   Credible plans are specific, internally consistent, and grounded in real market data. They demonstrate that the founder understands both the opportunity and the risks involved.