Just like any other business, the lending industry is undergoing a dramatic change due to the availability of new technology, particularly in regards to the Internet. But business financing may be one of the only industries that can say that the effects of these changes are almost entirely positive. The advancement of the Internet is increasing the need for small business loans and making it much easier for potential borrowers to obtain funding.
Three of the most popular uses of small business loans are taking on new hires, launching marketing campaigns, and employee training. These efforts are vital for adapting to a changing environment in addition to maximizing revenue and efficiency. Businesses require not only the most up-to-date equipment and software but also the people who know how to use it. For many industries, technology is advancing so quickly that businesses are reporting a “skills gap,” or a lack of employees who are experts in new technology. The average employee did not learn about these technologies in college, and in the time it takes you to become an expert with a certain tool, a new, more efficient version of that tool has emerged.
INVEST IN THE FUTURE
Businesses must seek small business loans in order to take on new hires and train employees at the same speed in which technology advances. Some of these new hires will likely be digital marketing specialists because any industry, from insurance to healthcare to, yes, business financing, must accept that most people decide what services and products to purchase based on what they see on the Internet. Leveling the playing field is nearly synonymous with using the latest marketing tools to bombard your target demographic with mobile-friendly advertisements.
New technology may have made you take out a small business loan but it has simultaneously eliminated a great deal of the tediousness attached to this process. Business owners used to automatically turn to banks for loans since they have already been working with them for years. But the Internet allows business owners to research other sources of funding, learn about different loan programs, and read lender reviews by other borrowers. This research will introduce them to alternative business financing companies, which operate with the same convenience of the Internet.
NEW HELP IN A NEW WORLD
Applying for a bank loan typically requires mountains of paperwork but some alternative business financing companies will merely ask for a one-page application that takes a few minutes to fill out and let you upload the necessary documents straight from your computer. Such companies can even approve your loan in as little as 24 hours via underwriting algorithms while banks take months just to tell you you’ve been rejected.
These algorithms are able to examine thousands of data points, such as cash flow analysis and transactional records to determine whether a business can pay off debt without obstructing revenue. Banks, on the other hand, often judge borrowers based on personal credit score and the availability of collateral. Many business owners do not have perfect credit scores or own property but alternative business financing companies can look deeper into the performance of their business and see that they are in a solid financial position.
The idea of taking out a hefty loan without meeting someone face-to-face might make the average business owner rather uncomfortable, especially if he or she intends to take out a second, much larger loan in the not-so-distant future. But the Internet has made it possible for lenders to forge long-term relationships with borrowers, regardless of how physically separated the two entities may be. Whether it is through email, blog posts, or social media, alternative business financing companies can establish trust with borrowers by reminding them that they cater to the unique circumstances of their industries and should be contacted as soon as borrowers need access to capital once again.
TAKE A LOOK AHEAD…
Sources of business funding could very well come to use mobile technology, specifically applications, to make paying off a loan less stressful. The Merchant Cash Advance financing program, for example, provides funding today in exchange for a percentage of future credit card sales. Imagine an app that outlines how much credit card sales a business conducted in a single day, how much money the lender deducted for that day’s payment and how much money the lender collected after a month’s worth of payments.
A similar function could exist for business lines of credit, while borrowers of more traditional program like term loans could use the app to remind themselves how much debt they have paid back and how much more they must pay back before the due date. Such an app could also provide a calculation that feature that helps potential borrowers figure out how much money they should ask for to finance a certain investment.
IT’S ONLY GOING TO GET EASIER
It won’t be long before accessible technology eliminates virtually every negative element of taking out and paying off a small business loan. The answer to any question you might have will be just a click away, allowing lenders to handle the massive influx of borrowers that ensues when business owners realize that staying ahead of the game is an expensive but worthy investment. It’s easy to become intimidated by all this accessible information but business owners should take comfort in the fact that the primary purpose of technology in small business financing is showing how versatile lenders can be. The more business owners know, the more borrowers small business lenders will receive.