SBA Predicts AI Cuts Small Business Costs by 10–20% While Driving 5–15% Payroll Growth
September 29, 2025
Bob Coleman
Founder & Publisher
Main Street Monday: SBA Predicts AI Cuts Small Business Costs by 10–20% While Driving 5–15% Payroll Growth
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:
- Short-term pressure: Firms may need larger working capital lines to cover payroll as they ramp up staff to meet new demand.
- 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.