The solutions that technology has realized all over the globe in the past several decades are essentially countless. However, one notable change is within the world of business. Technology has significantly changed the way business is done, including financing for small businesses.
Historically, financing for small businesses was extremely challenging and time-consuming to obtain as a traditional lender was virtually your only option. In fact, it is still challenging and time-consuming to obtain today, if you choose to go with a traditional lender. Although, more and more online alternative lenders are popping up, making it easier than ever for small businesses to obtain funding. This is a positive change that has helped small businesses achieve their goals.
How technology has changed the small business loan landscape
Small businesses have struggled a lot in the past to achieve their goals as a result of financial constraints. Fortunately, alternative lenders have acknowledged the problem and created a solution: online lending. Technology has saved the day yet again! Let’s explore the benefits of online financing more below.
Connects more borrowers with lenders
Since financing is available online, anyone with a computer can complete an application. Before, people needed to visit a physical branch to apply for financing. After that, it could take four to six weeks to process the application. Unlike today, traditional financing was usually the only option available to small business owners. The elongated and rigid application process hasn’t exactly been appealing to all small business owners which has reduced connectivity.
On the other hand, online financing has a rapid approval time, usually, funding will be received within one to two business days. The rapidness of the application process and approval time has connected more borrowers with lenders. Furthermore, it is even easier than ever for business owners to research different lenders and select the best possible funding solution to meet their needs.
Streamlines the application process
The beauty of online applications is the lack of paperwork. Historically, loan applications contained a lot of paperwork which needed to be collected and signed physically. As you probably know, paperwork unnecessarily complicates application processes.
Online applications remove paperwork from the equation which streamlines the whole process. This is a major efficiency that makes the financing procedure simpler for both the borrower and the lender. As a small business owner, you can dedicate less time to finding financing and more time to running your business.
A study conducted by the Harvard Business School, in 2014, showed that businesses spend 25 hours on average completing a bank’s business loan application. But when using an online lender, businesses spend about 30 minutes on an application. This difference in time is mainly attributable to technological advances. As most business owners would agree, freeing up any amount of time is an absolute blessing that is always welcomed.
Simplifies approval needs
Online business loan applications are automated and efficient. As a result, online lenders only ask questions that are required for approval. In addition, online lenders don’t ask for tons of unnecessary paperwork the way traditional lending institutions do. Furthermore, it is acceptable to use digital copies, instead of traditional paperwork, that can be uploaded directly from your computer.
Banks and other traditional lending institutions focus heavily on credit scores while online lenders do not. Credit scores are usually considered to be an important consideration for approval with traditional lending institutions. On the contrary, online lenders use tons of other metrics to measure creditworthiness before approval. Not only does this reduce the stress of business owners who struggle to meet strict credit requirements, online lenders actually get a better picture of their applicants’ financial position.
Keeps borrowers and lenders connected
It is a common misconception that a technological relationship is less advantageous than an in-person one. Borrowers and lenders stay connected after an online loan has been approved and completed. Typically, these relationships are long lasting and mutually benefit both parties despite any geographic constraints. Communication can include emails, newsletters, informative webinars, and educational articles among other modes.
More people have access to financing
Unfortunately, studies have shown that minorities have experienced difficulties in the loan application process with traditional banks. For example, female entrepreneurs were more likely to experience rejection or challenges when applying for a loan according to a recent study. A computer can’t discriminate, meaning that minority groups, and thus more people, have access to financing. Online lenders focus on what matters which a step in the right direction to get more small business owners the financing they need.
More options, better connections, and increased approval
Online lending gives small business owners more financing options, better advantageous connections, and increased approval time and frequency. All of these benefits have enabled small business owners to achieve their goals quicker and with fewer setbacks. What will technology allow small business owners to do next?
This article was contributed by Loans Canada, Canada’s original loan search platform.