Xan Myburgh is CEO and co-founder. Backd Business Fundraisingis the leading alternative financial solution.
Technology has changed the way we work. It has rapidly expanded the nature of how we connect and collaborate globally.
Business and business financing are no exception. Financial technology has changed the way small and medium-sized businesses access capital. Previously low access has opened the door for further growth for these companies.
As technology advances, the impact of fintech will continue to spill over into the world of finance, but here are four of the major impacts the financial industry has had so far.
Providing more access to capital
The stringent and often stringent requirements of traditional lenders can inadvertently close the door for business owners looking to expand through business loans. The terms entrepreneurs are often presented with can make accessing the capital needed for growth a more difficult task than it really needs to be. The presence of so many digital lenders makes more capital accessible to small business owners.
Make bill payments easy
Gone are the days of hard-copy invoices and formidable stacks to ensure business owners know their operating costs. Fintech has enabled business owners around the world to track deals and financings from the comfort of their own homes with the swipe of a finger or the click of a mouse. Notifications and automatic lotteries allow business owners to take responsibility for not failing to pay and better plan their capital inflows and outflows.
This is something traditional lenders have also started offering in recent years, but fintech has its roots in the tech sector. These companies are always at the forefront of the future, striving to make payments as easy as possible, taking advantage of the waves of innovation that are regularly pushed out by this growing industry. Innovation certainly benefits all sides, and this challenges traditional lenders to keep up with the changes Fintech continues to bring about.
Reduce time to access capital
When it comes to technology, speed is paramount. We want the fastest internet speeds, the fastest processing power. Today’s advances in AI have allowed fintech companies to customize algorithms, reducing the time it takes to pre-approve a business.
The fintech industry has cleared numerous hurdles faced by SMEs by reducing the eligibility documents required for capital, resulting in faster application times. This is especially important for businesses that need funds as quickly as possible.
Spur more competitive rates
Competition is good for business, but business owners stand to gain the most in the fintech world. With so many players in the alternative financing game, companies need to maintain competitive rates. This allows entrepreneurs to shop while making the best choices for their business in the short and long term.
While traditional banks generally have strict policies and rates, fintech companies are changing the rules by offering more flexible rates and shorter terms such as 16 months.
navigate the way forward
When considering financing options for your business, it’s always important to consider that there are no solutions without warning. The world of fintech is still relatively new, its waters are still charting, and many of the legal constraints and regulations are changing within the industry as it continues to build. Because the industry is so new, business owners have far less track record available when comparing Fintech with traditional lending options. However, this will change over time.
Also note that the standard loan terms offered by the fintech industry can be quite different from what entrepreneurs expect from traditional lenders. This stems from fintech lenders providing financial services to those who are often left behind by traditional lending restrictions, such as those with lower credit ratings, and from marketing to those who want shorter terms. increase. This helps balance access to capital so more businesses can grow.
Fintech is also limited in terms of its processes. Being rooted in the tech field can deter less tech-savvy entrepreneurs or those who are easily hesitant by the online application process. As it grows, the fintech industry will look to traditional lending methods to expand its reach and incorporate aspects of a more human-centric approach to further support the small business community or bring everyone into the application process. It may strengthen education to make it accessible.
Technology is becoming more sophisticated and accessible by the day, ultimately benefiting small business owners. Technology continues to transform our capabilities, opening doors to previously closed small businesses so that they can continue to grow.
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