Article Summary: How business owners borrow capital to fuel growth and build their businesses has changed a lot in the last few years. The introduction of new small business lending technology is making more capital available to more businesses.
Here are six technologies that have changed the way small businesses borrow:
- The Internet: Like everything else we do, the Internet has impacted the way small businesses access borrowed capital
- Online Applications: In addition to being online, the simple and straightforward application process makes it much easier for a busy business owner to apply for a business loan
- Big Data: Access to more information about the health of your business make it easier for small business lenders to evaluate your business' creditworthiness
- An Online Connection to Your Bank: This connection makes it easier for both you and your bank to review critical information to evaluate your business' financial health
- ACH Transactions: By enabling a direct debit from your business checking account, it makes it easier for you to make timely payments as well as allowing the lender to collect each and every periodic payment
- Mobile Banking: By minimizing the need to physically go to the bank to review account balances, access funds, or even start a loan application, technology is making it more convenient to apply and manage a small business loan.
Keep reading to learn more about what technology has done to the small business loan process.
I’m convinced there are more options available than ever before for small businesses looking for borrowed capital. What’s more, I think it’s small business lending technology that has made it much easier for lenders to evaluate creditworthiness, create loan options to meet the varying needs of small businesses, and business owners to apply and access capital.
The traditional way banks have worked with small business owners had been basically unchanged for the last 100 years. Online alternatives to the traditional bank have introduced a better way to evaluate loan applications and rethink the small business lending process in a way that benefits both business owners who rely on capital to fuel business growth and fund other profit-building initiatives, and the lenders who supply that capital.
Some of the small business lending technology that allows lenders to make more capital available to more small businesses include:
- The Internet: The Internet has changed the way we do just about everything from shopping for shoes, to finding a mechanic, and even finding a small business loan. A small business owner need no longer go from bank to bank looking for a potential lender—the options are readily available online from traditional banks, the SBA’s Loan Guarantee Program, online lenders (like OnDeck), and several other alternatives to a small business loan that help make capital available to small businesses.
- An Online Application: Putting a small business loan application online is only part of the technology, making that online application simple is the real benefit to a small business owner. Instead of wading through 30 or 40 pages of loan application documents, a streamlined application that can be accessed in the privacy of your place of business, allows a business owner to quickly complete an application (often within a few minutes) and find out within a day or two whether or not they might be approved for a business loan. This process would often take weeks—or even months, without the technology that allows the lender to quickly review an application and make a decision.
- Big Data: By big data, I’m referring to all the information that is publicly available about your business. Business lenders today can leverage a lot more information about how your business compares to other business in your industry, in your region, and of your size, when it makes credit decisions about your business.
- An Online Connection to Your Bank: The ability for a lender to access your business banking records make it easier and faster for a lender to evaluate your cash flow and ability to make the periodic payments required to service business debt. This connection makes it easier for a lender to evaluate and potentially say, “Yes,” today that might have said, “No,” just a few years ago.
- ACH Transactions: An ACH debit from your business bank account allows a lender to seamlessly accept payments from your business as well as making it easier for your business to make those payments.
- Mobile Banking: Many people today are able to view their personal account balances, make transfers from one account to another (from a personal savings account to a personal checking account for example), and even make deposits. Many small business lenders today make it possible for a business owner to start a loan application on their smart phone, manage a business line of credit, and review their loan balances via their smart phones.
Of course, all this small business lending technology doesn’t eliminate, or even mitigate, all the fundamental business credit best practices a lender uses when evaluating your business creditworthiness, but it does make it easier to see the entire picture of a healthy business while considering business metrics that demonstrate the health of your business, and your business’ ability to service debt, beyond what the bank might have considered before the introduction of this technology. That being said, technology shouldn’t replace the need for a skilled loan officer to review your business loan application, but it does enable them to see more information, streamline the review process, and make more borrowed capital available to healthy small businesses.
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