The 2008 financial crisis tightened restrictions on how banks could execute lending decisions. This left small business owners with limited options to satisfy their financial needs.
The gap in the lending market was quickly filled by online and alternative lenders. While it created access to loans and lines of credit for small businesses, the industry can be confusing and complex.
With so many uncertainties, it’s important for small business owners to understand their financial health and what resources they can access. A lack of transparency in the small business lending market has made it difficult for borrowers to establish trust.
The following four trends have shaped the small business lending industry over the last few months and will only continue in 2018. By knowing what’s out there, small business owners can make the best decision for their company’s interests.
1. An Emphasis on Transparency
Lenders are moving away from advanced, convoluted financial vernacular in favor of easily understood communication. This trend, along with providing transparent terms and financing calculations, helps business owners feel confident in their lending options.
2. More Choices Than Ever
While traditional brick-and-mortar banks remain a main source for financing, there are numerous online lenders available. Many people prefer to search for options online first, which is a major benefit for alternative lenders. As a result, banks and other lenders have pushed for a greater online presence by putting their applications online.
With alternative lenders, the time it takes between application, decision, and distribution of funds is greatly decreased. In some instances, decisions can be made same-day, and funding can be allocated in as little as 24-48 hours.
The increase in online lenders is ultimately to the benefit of small business owners. Entrepreneurs can get online, do a search, and identify the best rates and terms for their specific lending needs.
3. Credit Still Matters
Even in the alternative lending space, a great credit score still pays off. This applies to both personal and business credit scores.
Taking steps to improve your credit can help your business secure better lending terms and rates. If your business’s credit score is healthy, it can also help you negotiate better payment terms with your vendors and suppliers.
You should be as savvy with your business’s finances as you are with your personal ones. This means that along with checking your personal credit, you should pull your business credit report as well. It represents your business’s reliability as a borrow, and could greatly influence your lending options.
4. Lender Partnerships
The last few years have seen an increase in the number of bank and online lender partnerships. While many view the two entities as natural competitors, there are advantages to working together. Online lenders offer speed, better user experience, and flexibility. Banks, on the other hand, have a personal touch, low cost of capital, and a large customer base.
Two notable examples are the partnerships between Regions Bank and Fundition or JP Morgan Chase and OnDeck. When Regions Bank partnered with Fundation, it leveraged their technological components to offer a fully digital application for customers. OnDeck’s technology merged with JP’s Morgan’s bank deposit data, which created automated underwriting for small business borrowers.
As partnerships between banks and online lenders continue to form, small business owners will reap the benefits. Financing options will be available more quickly and with greater flexibility. The bank’s lending power will lower the interest rates on financing options.
Financing for Your Small Business
Having ready access to financing, whether it’s a loan, line of credit, or something else, is critical for businesses of all sizes. However, identifying which products are best for you needs is a time-consuming process that takes a lot of research.
ValueOne is there to help you secure the funds your company needs to grow and thrive. All you need to do is fill out one form or make one phone call to get pre-qualified for a range of options that are tailor-fit to your company.
Talk to our expert team of advisors about your funding needs. Contact ValueOne or call 1-855-960-5315 today.