The financial technology industry has changed the way that we think about financial products and processes. From borrowing money to investing to accepting payment, fintech products have transformed the way businesses and individuals manage their money. One of the most successful branches of the fintech industry is online lending, which has made it easier for entrepreneurs and business owners to get the money they need to start and grow their businesses.
As the fintech industry continues to grow, new advancements in online lending are making it easier and more convenient for businesses to get the funds they need when they need them. Below are just 3 advancements in online lending that every business owner should know about:
1. Online lending opens up new opportunities for those with less than stellar credit
Online lending technology has started to open up new opportunities for small business owners and entrepreneurs who do not yet have extensive business credit or are still working on building their personal credit score. Whereas most traditional lenders use personal credit score and business history as a determining factor for a credit decision, online lenders have many tools at their disposal that allow them to get a more complete and accurate picture of a borrower’s creditworthiness.
Online lenders make loan decisions based on more than just a credit score. Many online lenders use predictive modeling, data aggregation, and electronic payment technology to better understand a business’ health. In addition to looking at personal credit score and industry-specific trends, online lenders also consider the small business’ current cash flow and performance measured using both traditional and non-traditional sources of data. This allows new business owners who do not yet have a long history of success to still access the funds they need to grow or expand their business.
2. Online lenders have become even more customer-friendly
The fintech industry grew out of a need for more customer-friendly financial products. With this in mind, online lending services were developed with the consumer in mind. Alternative online lenders work to understand what business owners need and create specific products that can better help businesses meet their specific financial goals. The loan application and decision process were all developed with a customer-focus, aiming to make the entire experience quick, simple, and hassle-free.
Though online loans for businesses have always been aimed at benefitting the business owner, the online lending industry is now taking even more steps to make their products customer-centric. In an effort to be transparent and help the business owner get the most out of their lending experience, many online lenders are now offering clear disclosure that helps potential borrowers better understand their terms of service, the estimated cost of paying back loans, and annual percentage rate and total cost of loan. This helps ensure that the business owner has a clearer picture of their company’s finances without any hidden fees or questions about repayment.
3. Technology is making the online lending process simple, fast, and secure
Perhaps the most noticeable advancement in online lending is the improvements to the lending process. Unlike traditional lending, online lending offers a quick and simple application that can be completed when and where it is most convenient for the business owner. Online lenders connect to a business’ online accounts such as PayPal, eBay, or online banking to collect real-time data that allows them to make a more accurate credit decision. Potential borrowers are then able to get a quick loan decision, sometimes in a matter of just moments.
The convenience does not stop at the application process. Once approved, borrowers can then access their funds quickly and conveniently. Funding is often distributed through a direct deposit into the company’s business checking account. However, online lenders also offer other convenient options like a business line of credit that allows small business owners to access funds when they need them and only take the amount that they need to use. The repayment process is also convenient as business owners can set up reoccurring monthly payments deducted automatically from their business checking account or make their monthly payments online from a central dashboard that also offers a current balance and other repayment information.
What’s more is that the entire process is secure. Online lenders are using advanced security to connect to a borrower’s business accounts without compromising any private business data. Many online lenders are using cutting-edge consumer data protection and working to earn TRUSTe’s Privacy Certifications, which ensure safe customer data management practices and regulatory frameworks. With these online data protection measures in place, online lenders can ensure that convenience does not come at the cost of security.
These are just a few of the advancements in online lending that are making the loan application and decision process simpler and more convenient for business owners. As the fintech industry continues to grow and innovate, it will be interesting to see what is on the horizon for small business lending.