As the business landscape changes in response to shifts in the economy and the rise of demands in new industries, the world of business financing has also changed. The business financing structure that once worked for the majority of business owners is no longer able to meet the needs of the modern marketplace. As more and more small and online business owners have begun to seek funding for their companies, financial institutions have started to realise that a one-size-fits-all solution to business lending no longer works for everyone.
As a result, the financial industry has had to evolve to meet the growing and changing needs of the modern business owner. Below, we’ll discuss a few of the changes that have transformed the business finance industry, and what these changes might mean for new and thriving businesses.
3 Shifts in the Business Finance Industry
Have you ever heard the phrase, “the only constant is change”? This seems to be true in most things, and business finance is no exception. Here are some of the ways that the business finance industry has transformed in recent years:
1 – The demand for business funding is changing.
The demand for business funding has changed, calling for a new system and process for business lending. Whereas business lending used to be geared toward larger businesses that needed to borrow big, today, the modern small business owner is often looking for a much smaller loan to help start, sustain, or grow their business. In fact, about 51% of small business owners are looking for business loans that are less than $100,000, and 39% are looking for loans below $50,000. This change in demand has started to change the way that the business finance industry approaches business lending.
Small businesses are an important part of the U.S. economy. These businesses help provide jobs and strengthen communities. However, small business owners need access to capital in order to continue to thrive and contribute to local prosperity. The U.S. Small Business Administration has already taken notice of the need for smaller loans. This organisation has started to eliminate fees for smaller loans of under $150,000 in an effort to encourage their lenders to provide smaller loan amounts to small business owners in need. This is just one example of how the business finance industry has responded to this change in demand for business funding.
2 – Technological innovation is opening up new opportunities for brands that need to borrow.
Technological innovation has also brought big changes to the business finance industry in response to this shift in funding demand. The rise of Fintech has brought a wealth of flexible funding alternatives for businesses big and small from a variety of industries. Alternative online lenders have improved access to small business funding opportunities, making it easier for business owners to get the money they need to start and grow their companies.
Financial technology companies are using technological innovations to transform the way that businesses borrow. New technology has made the application process faster and more convenient for borrowers. Fintech companies are also using real-time data to make accurate loan decisions in a matter of days, hours, and sometimes even moments. This allows business owners to get the money they need faster and start putting it to use more quickly.
3 – Traditional financial institutions are teaming up with alternative lenders.
Another significant change in the business finance industry is that traditional financial institutions are now teaming up with alternative lenders in an effort to provide more flexible loan options for business owners. These financial institutions have recognised that the traditional lending application and approval process are not made for some modern business owners. Not to mention, many small business owners need smaller loan amounts and easier access to their funds.
Teaming up with alternative lenders allows big traditional lenders to better meet the needs of more business owners, including those who own small and online businesses. In these partnerships, banks and alternative lenders are working together to combine their skills and knowledge in order to help more business owners get the funds they need to start and grow their businesses. Though these partnerships are not yet widespread, this trend will most likely continue into the future as the business finance industry continues to grow and transform.
By Amanda Florentine of US based alternative business lender, Kabbage
We like to publish articles from third parties, it helps to offer a broader range of resources and different insights. Thanks to Kabbage for this article, if you have any questions about it please get in touch or add your comments to the post.