For centuries, the business world followed the same pattern: CEOs specialized in a particular industry, retailers sold to customers and banks provided the business loans. However, these things are no longer accepted as the undisputed fact.
Technology is changing every aspect of business including how businesses get financing. In 1994, Bill Gates, the co-founder of Microsoft compared retail banks to dinosaurs, saying they could be bypassed. And boy was he right: two decades have passed since Bill Gates made the statement and the internet has completely reshaped the banking landscape. A prominent change is how businesses, in particular small businesses, get financing.
Today, there are approximately thirty million small businesses in the United States and more than half of the country’s working population is employed by these small businesses. Considering this, it would be fair to say that the economy of the United Sates depends on the financial health of the small businesses present in the country. In fact, this claim is backed by statistics. As of 2015, the annual contribution of small businesses to the United States GDP was $6 trillion.
Using their smart phones, tablets or computers, consumers today can perform a wide-range of bank transactions from the comfort of their home including managing stock portfolios, paying bills, transferring funds and making deposits. In short, the internet has changed how small business owners do banking including how they get business loans and other financing products.
Capital is required to start a business and run it efficiently. By providing small business owners with lines of credit, startup loans, refinancing programs and general business loans, retail banks have helped the small businesses to survive and grow. However, getting a loan from a retail bank is generally a complex and time-consuming process.
The difficult loan approval process is the biggest issue facing the small business owners looking to get financed. Generally, banks approve only half of the requests put forth by small businesses. This means that many small businesses aren’t getting the funds they need to operate and/or grow their business. Luckily, technology is helping to change that.
Applying for A Small Business Loan Now Vs, Applying for A Loan 10 Years Ago
Imagine you were an owner of a small business ten years ago. Now, what options would you have to get a loan for your business? The most obvious option would be looking for financing from friends and family. Or if you didn’t mind a long tiring process, you could go to a local bank and get financed. But, these were the only two options you had.
Fast forward ten years and you have a plethora of options. Thanks to the internet, many new lenders have entered the fray. Business financing is no longer the dominion of retail banks. Today, the business lending/financing industry has plenty of players and most of them are present online. Many businesses today are choosing online lending resources over the brick and mortar banks when they need capital.
In the not so distant past, local banks were the only financing option that small business owners had. Banks used billboards, radio or television to advertise their product and then waited for a business owner to visit them and complete a loan application.
Loan banks had a sort of a monopoly. They knew that if a business owner used any other of their other financial services then they’d be the obvious choice of the business owner for a loan. The good news is that technology is helping break this monopoly.
Thanks to internet technology, small businesses can now secure a loan from a lender in a different state or even country. Moreover, businesses can hand-pick financing that meets their specific business needs. This option isn’t available at the local bank.
In addition to the above, small business owners can research the financing options available to them by learning by the experiences of other borrowers, accessing case studies and reading online reviews. Following are 3 ways technology has revolutionized/is revolutionizing small business financing.
Speed and Simplicity
The speed and simplicity offered by the online financiers is a major reason more and more small business in the United States are turning to online lenders for their small business financing needs. Highly automated and efficient, online business loan applications don’t ask irrelevant or unnecessary questions. Also, after submitting an application, business owners do not have to wait for weeks before money is transferred into their bank. This make financing a simple and quick process.
Staying Current with The Loan
To automatically withdraw agreed-upon loan payments from the small business accounts of their customers, many online lenders make use of electronic debiting. This allows small businesses to stay current with their loan, which in turn helps them to build a strong business credit profile.
In addition to the above, you will find many online lenders offering range of periodic payment options. Rather than creating an uneven cash requirement at the month’s end, the periodic payment option helps spread the burden of the cash flow evenly over the entire month. This allows lenders and borrowers to identify payment challenges early and then adjust accordingly.
Thanks to the global reach of the internet, small businesses can get financing from institutions other than the ones based in their state/country. Using the internet, small business owners can easily connect with banks and other lenders present in the different parts of the world. The wide range of financing options available online increases your chances of finding a suitable loan for your small business.
Technology is revolutionizing small business financing and the aforementioned information reveals exactly how.
by Bobby J Davidson
As the President of Percento Technologies, I provide day-to-day leadership to the company’s senior management and I am personally involved in the strategy, business development and sales activities of the company.
The company was founded in 1999 with the purpose of providing a Business Technology | Anytime | Anywhere for organizations in need of Managed IT Services, Professional IT Consulting, and Infrastructure Projects. We have a fantastic suite of boutique-managed Cloud Servers to choose, along with Network Cabling and high end professional website services.
We personalize the IT experience with a team approach, working with clients from diverse sectors of industry, including banking, legal, health-care, energy and corporate business.