Technology Changes Business Loan Credit Requirements
Despite the fact that banking institutions continue to refuse businesses access to funding, numerous new private funding companies are willing to give good businesses the working capital they desire. Technological advances with data transfer and analysis, along with a constantly evolving internet has allowed private lenders to now offer a larger supply of business loans. The financing requirements for private business lending companies are also much more flexible than banking institutions so even small business owners with substandard credit can meet the requirements to apply. Most of the lending companies are available online so there are no traditional face to face meetings or time consuming trips necessary to discuss paperwork. The contributions from technology are slowly transforming the way small businesses acquire money.
Acquiring money is no longer a series of visits to your local bank. It is now as simple as opening a laptop. The reason private lenders can provide financing this way is because technology has allowed for immediate access to a company’s business background as well as the individual applicant’s credit history. More than that, a business’ presence online helps determine a company’s ability to pay back a business loan. There are review and forum sites, directories, social media hubs such as Facebook and Linkedin, as well as web page ranking and a series of other factors that help lenders create a clear profile of the borrower and their business.
The social media insight and some other web profiles have significantly changed the impact of credit score on the borrowing process. Business owners with bad credit now access to capital. The lenders now have much more insight into a business loan application with a social media pulse, reviews and much more. This allows lenders to project how a business loan will perform so it is no longer like the traditional way of receiving financing where a bank account manager simply looks at a piece of paper to determine the ability of an individual to pay off the debt. The internet allows lenders to see a developing company or even the next big thing before it arrives. This additional data gives lenders more confidence when lending to bad credit applicants, thus making much more capital available.
The availability of more lenders has also led to a series of financial loans and their derivatives being offered. From equipment and inventory loans and merchant cash advances to completely custom tailored cash exchanges, the variety of funding products today is almost unlimited. Most of the business loan types offered today are also unsecured. Now that a lender can determine or project the possibilities of a pay off they do not require great credit or collateral. This has made funding almost any situation or business need possible. Technology not only has changed the availability of lenders and their financial products, it has also transformed the terms and structures of most business loans.
The business loans for bad credit or unsecured business loans are offered for short terms, usually one year or less. This is mainly an attempt to curb the risk of default. The payments aren’t fixed either; they are usually broken down into percentages of future revenues. This allows lenders to avoid regulatory guidelines, but it also ensures payback. The reason there is much less risk in this type of payment structure is because the payments are deducted automatically from the business bank account or in the moment a credit card is processed. The business lending community is constantly finding ways through the use of technology to ensure being repaid for the funding they offer.
Technology has also transformed the speed of the business loan application process. What used to involve weeks of mail exchanges and telephone calls now only requires a few hours. This has also reduced the need for documents creating low-doc or no-doc business loans. Most of the data is available by internet so there is no need for submitting huge amounts of paperwork. Also, because there are so many ways to analyze the potential of a business loan candidate that most paperwork is unnecessary.
The entire business loan process is changing. Private lenders are replacing banks by providing business loans to small businesses in a quick and efficient manner. Business owners with bad credit can now receive financing because of technology’s assistance in providing further insight into an applicant. Technology has also allowed for a quicker application process. It seems likely that as technology improves so will the ability of small businesses to acquire a business loan.