In a world still going through a rapid technological transformation, it’s hard not to reject any notions of stagnation. The banking system and the lending functions, in particular, have seen an overhaul in recent times. They’re still being updated every now and then to match the market needs and ease up on human input while finding more ways to expedite processes and save time.
Below are some of the ways in which this is happening and the benefits these developments are bringing on board in relation to small business loans for startups:
Better and Easier Borrower-Lender Connection
Take a moment and try to imagine how lending institutions related to borrowers just about 50 years back, and you’ll appreciate just how much the relationship between borrowers and lenders has improved. Today, most lenders have an established online presence, and that makes it pretty easy and fast for a borrower to dig up any information they need about a lender from the lender’s website, online forums, professional networks like LinkedIn, and other social media platforms like Facebook and Twitter.
With this easily accessible and credible information, you’re in a better position to make an informed decision on whether the lender in question can satisfy your financial needs way before you even decide to contact them or apply for a loan to boost your startup. That’s definitely a positive aspect that saves you both time and money.
Improved Loan Application and Processing Efficiency
In the past, borrowers needed to present themselves in person for a one-on-one discussion with the lender about their installment loan request. However, this has now changed for the better. A startup or a small business owner in need of a financial “top up” can just head over to the lender’s online portal and submit their loan application.
In effect, this new development saves the time that would have otherwise been used in office meetings between the two parties. In fact, you can use the saved time in performing other important tasks to build your business. This makes the lending process ever more appealing and convenient to both the lender and the borrower.
Easy and Quick Assessment of Creditworthiness
In recent times, lenders would use personal credit scores to determine a borrower’s eligibility for loan approval. However, this method was unsatisfactory and often wrong with negative results. The advent of advanced technology targeting the banking and lending system or sector has brought with it a new effective metric system to achieve the assessment objective with much ease and less error margin.
Using an advanced data mining and processing metric system, lenders can quickly determine your creditworthiness using a variety of authentic data points obtained from various credible sources that include:
- Your FICO credit score.
- Your business transactions and cash flow estimates.
- Available public records relating to your finances.
- Your field of operation and market capitalization.
- Your online banking records.
This rigorous process makes it certain that the people qualified for loans are in the best position to pay back. In effect, it fosters trust between the two parties and consequently leads to more cooperation in propping up small business enterprises and startups that need funding to properly break into the market. As an involved party, you get to greatly benefit from this favorable development. This is how technology can bring you lots of fortunes – not to mention that a good FICO score affords you loans at lower rates.
This planet was once a huge expanse with numerous geographical locations seemingly far-flung from each other. For example, if you happened to live in the US, the only way to get to make a deal with someone in Europe was to cover the distance. For instance, it was impossible to get a loan from a US bank with no branches in the US if you were in the US. This made it difficult for small businesses and startups to access a larger pool of options for loans with competitive interest rates.
This limitation has been done away with since the introduction of high-end technologies in the banking and lending sector. As of now, every lender out there has established an online presence that enables people from various backgrounds to know about their services. In fact, some lenders are exclusively online-based. With the click of a few buttons, a borrower can apply for a loan at the lender’s online portal, get the application quickly processed, and have the loan money deposited in their online account like PayPal.
Online lending has globalized the borrower-lender relationship and broken the geographical barrier whereby it’s no longer a requirement for the two parties to be within the same geographical area. This has further helped with the integration of the global economy, with small business enterprises and startups as the main benefactors.
Improvement in record keeping, Security, And Administration
Long gone are the days when everyone used paper files for information storage. While some corporate entities still keep a few of those, the whole information is compiled and stored in a database. With a database, the information is better organized and easily accessible. Reports can be generated much faster than before.
In security matters, it’s a general agreement that keeping important data in soft copies in protected computer systems is far more secure than storing it in a file gallery reminiscent of a highly vulnerable traditional granary. A computer network secured with a good firewall and excellent security features and applications can go a long way in ensuring information security. You would definitely hate to hear that your bank got broken into and your physical files stolen – knowing that they may contain confidential information.
In business management, technology has revolutionized decision-making. A manager doesn’t have to be physically present in the office to review or approval a loan application. They can actually access the workstation from wherever they may be. That’s a great step!
Looking at the above-mentioned points of interest, you realize that technology has a really huge role to play in the financial market. Such systems are truly the future of business loans.