Bloomberg, the 77-year-old former three-term mayor of New York, is expected to file paperwork in at least one state declaring himself a 2020 candidate -- although some observers cautioned he may simply be keeping his options open as he flirts with a White House bid.
Biden, who will also turn 77 on November 20, has been the frontrunner so far in the Democratic race, placing himself in the center with South Bend mayor Pete Buttigieg while Vermont Senator Bernie Sanders and Massachusetts Senator Elizabeth Warren run to his left.
Political analysts said a Bloomberg candidacy might cut into Biden's support.
"At first blush, yes, one might think Bloomberg would hurt Biden more than others," said Kyle Kondik of the Center for Politics at the University of Virginia. "But we have to remember that sometimes voters don't fit neatly into ideological categories.
"While neither is running hard to the left and both are older white men, voters might perceive key differences between them," Kondik said. "Bloomberg has to actually show he can draw significant support in order to hurt Biden."
Jason Mollica of American University said the entry of Bloomberg in the race could be "an indication that he believes the Democrats do not have a strong candidate that can defeat President (Donald) Trump."
"Mr. Biden's campaign isn't the strength it was at the start and if Mr. Bloomberg gains the support of the centrists in the Democratic Party, that is a big sign for Mr. Biden the party doesn't feel he's the right candidate, either," Mollica said.
Trump himself weighed in on Friday on a potential Bloomberg candidacy.
"Little Michael will fail," Trump told reporters in a reference to the stature of the 5ft 8in (1.73m) Bloomberg. "He doesn't have the magic to do well.
"There's nobody I'd rather run against than little Michael," Trump added. "He's not going to do well but I think he's going to hurt Biden actually."
According to US media reports, Bloomberg has sent staff to Alabama to gather the signatures needed to register for the Friday deadline for the Democratic primary in the southern state.
Alabama is not one of the early primaries but it has the earliest deadline to register.
'Ensure that Trump is defeated'
Bloomberg said back in March he wouldn't run, but has been toying for weeks with the idea of seeking the White House after all, according to advisors.
"We now need to finish the job and ensure that Trump is defeated -- but Mike is increasingly concerned that the current field of candidates is not well positioned to do that," Bloomberg advisor Howard Wolfson said in a statement.
"Based on his record of accomplishment, leadership and his ability to bring people together to drive change, Mike would be able to take the fight to Trump and win," Wolfson added, according to Bloomberg News.
Bloomberg, the co-founder and CEO of the media and financial services company that bears his name, is one of the richest people in the United States.
According to Forbes, Bloomberg is the eighth richest person in the country and is worth $52.4 billion.
His huge personal wealth would likely shake up the contest at a time when Biden's fundraising is sagging.
Bloomberg, who was elected mayor of the Big Apple in 2001 and served until 2013, is seen as close to Wall Street and opposed to some of the policies espoused by the more liberal Warren and Sanders.
"He thinks Joe Biden is weak and Sanders and Warren can't win," the New York Post quoted a source familiar with Bloomberg's plans as saying.
Bloomberg's entry would bloat an already crowded field of contenders, with 17 candidates currently vying for the right to take on Trump as the Democratic nominee.
Sanders and Warren regularly lash out at financiers and big corporations and both have said they plan to hit the rich with bigger taxes.
"Welcome to the race, @MikeBloomberg!" tweeted Warren.
"If you're looking for policy plans that will make a huge difference for working people and which are very popular, start here," she added.
Bloomberg has switched between the Republican and Democratic parties over the years and also served as an independent mayor.
He has used some of his fortune to back Democratic politicians and fund policies that he believes in -- including gun control, the fight against climate change and anti-vaping efforts.
Bloomberg considered running for president as an independent in 2016 but eventually opted not to for fear of splitting the Democratic vote.