4 Trends to Online Lending for Small Business Owners

It is hard for small business owners to get loans from traditional sources like banks. These sources want a high credit score, past business history, in some cases a collateral and more. Even if you have everything in order, the approval process for a business loan is very stringent, and the chances of you getting a loan are dim. Banks have several internal and external factors that influence the business loan approval process. These factors are enough to let you down when it comes to business loan approvals. 

Alternate loan sources are available online:

Thanks to the Internet and technology, many alternative sources of the loan have emerged to cater to small business needs. These sources have the objective to help small business owners get a loan for the expansion of their units or to buy inventory. In fact, there are some alternate sources of loan that moneylenders provide to new entrepreneurs. Even if you have poor credit or bad credit you are eligible for these loans. The application process for them gets done online, and the loan gets approval in a few days or even hours.

After the 2008 recession, alternate lending options boomed to meet the demands of both consumers and small businesses. Since then, the industry has grown extensively and shows no signs of slowing down. Industry experts in the field also claim that by the year 2020, at least 1 in 5 small businesses will get funds from an alternate source of money lending. The current industry approximately stands at $5 billion and so in 2020 it should rise to $52 billion a year. That is encouraging news for both small business owners and the economy. However, these questions do crop up in mind –how will this targeted be achieved? What developments are needed for the online money lending industry or Fintech to grow to enable these small business friendly companies to increase money lending over traditional sources of money lending like banks and other financial establishments? 

4 Trends to Online Lending for Small Business Owners:

The following are four trends for small business owners to look out for to help the online money lending industry to flourish.

1. Multi-product offers:

Look at the nation’s biggest financial establishments and loans sought in the market. They are banks, student loans, small business loans, mortgage, credit cards and other miscellaneous products. If you check the online money lending scenario, you will find online money lenders have focused and paid attention to only one side of the financial market. The online money lending group provides offers for personal loans and small business loans. There is anticipation that in the next few years, these online money lenders will offer consumers and businesses multiple offerings. Now the question that comes to your mind is why? Experts in the field of business loans and lending state to get a more significant share in the market, these alternate money lenders online to retain their clients will focus more on cross-selling. That means the more a single money lender can satisfy the needs of its borrowers the better it will perform in the market. For instance, in a funding circle that is peer to peer, a business can get 1-5-year term loans in the USA. However, in the UK, small business loans have been expanded to a span of 6 months too. 

2. Partnerships with banks:

If you look at banks, you will find they have huge clients and customers, a low capital cost and scale. Compare alternate money lenders to them, and you get the advantages of better user experience, speed, and a regulated space to function in. In reality, they are natural competitors however this does not mean they have to be natural competitors. There are many partnerships now being formed between alternate money lenders and banks. That will continue in the future to meet the diverse credit needs of small businesses. 

For instance, JP Morgan Chase and OnDeck have entered into a partnership when the former bank on the latter’s technology. Likewise, OnDeck banks on JP Morgan Chase’s bank deposits for small business owners to provide automated underwriting services to the small business borrowers of the bank. Another popular partnership in the above niche is between Foundation and Regions Bank. Here, digital applications are being worked on for Regions Bank customers. If you carefully examine the market, you will find there is a lot more than unites banks and alternate money lenders than divide them. Industry experts are looking forward to an increase in such partnerships in the future as well. 

3. Self-policing:

When alternate money lenders came into the market, there were no uniform regulations for them. Every company had their own rules and regulations. However, in the past few years, there has been an increase in several initiatives in the field of self-policing. They range from trade associations to announcements in the industry. There have been attempts of self- regulation by bodies such as The Marketplace Lenders Association, The Innovative Lenders Platform Association, The Responsible Business Lending Coalition and more esteemed names in the field for self-policing. They are entering into sincere endeavors when it comes to the rights of the borrower and the responsibilities of the money lender. The broker or lender has to know and respect these responsibilities when it comes to business funds.

4. Government regulations:

Government regulations have increased in the field of Fintech. It is one of the hottest topics of discussion in the finance and banking sector. Here, industry experts are focused on regulating the industry correctly. In the event of misregulation, a promising sector will die an early death.

Therefore, if you are a small business owner and are looking for a loan for your business unit, consider online alternate sources of funding. The industry is booming, and in the next few decades, it will evolve into a significant segment of the economy with regulations to protect the rights of borrowers like you. In this way, you can alleviate stress and focus on the expansion of your small business unit with success!