With all the options out there, it’s easy to see that traditional banking just doesn’t work anymore. But where do you start? Loan Brokers are a surefire way to navigate getting your business funding.
Societies have been operating with some kind of “Rules of Exchange” ever since humans began exchanging and bartering goods. This phenomenon explains the deeply rooted tradition found in the lending industry. However, the world is changing rapidly and in ways never seen before; this has had banks having a hard time keeping up in being able to service the kind of clients that the world now has.
Relatively new industries like FinTech, AI and machine learning, and more, are quickly introducing new ways for people to manage their money. Some traditional banks are learning to utilize these new technologies, but some are still trying to catch up.
We will discuss the most prevalent challenges traditional banks face and how alternative funders are helping fund businesses in an ever-changing financial world.
Getting Funding for Women and Minority-Run Small Businesses
Women and minority-owned businesses are the fastest-growing types of business in the country. According to recent statistics, women-owned and minority-owned businesses account for 20% and 18% of all American businesses, respectively.
It is perplexing that most of these businesses are funded with the help of personal loans from family or friends. Many funders point to the lack of credit history and low credit score as the reason, and others point to a phenomenon called “lender bias.” While lender bias is hard to prove or measure, many believe that not all banks play fair when issuing loans to women and minority-owned businesses.
Relatively new businesses, and their subsequent lack of credit history, have forced lenders to change lending criteria and issue loans according to projected future profits. AI and machine learning have become vital tools in measuring a business’s viability in the future.
A knowledgeable broker knows which lenders are keeping up with the times. And have the ability to connect businesses with fair and equitable lenders. A good funding broker knows which lenders are staying current and who can best serve their merchants.
The Dangers of Open Banking
“Open Banking” is a term often used to describe how financial technologies can be integrated to provide more updated consumer information easier and faster.
Lenders that have adopted these open banking tools have easier access to vital information needed to approve your business loan. When applying for a loan, your business can benefit from having all of its most recent information available for the lender to assess.
Open banking can, however, work against a borrower. Lenders can also see other aspects of the borrower or borrower’s business, like risky behavior posted online, personal investments, and more, that can harm their application’s chances of being approved.
Loan Brokers differ in that their focus is on a business’s plan for future revenue and growth. Brokers study you business’s cash flow, performance, and other key pointers to identify and connect you with the best funding solution for your business.
Financial Technology (known shortly as “FinTech”) companies have been challenging traditional banking systems by introducing technologies that range from banking apps to crypto. A smart bank can use Fintech to create a more seamless and accessible banking experience for their clients and broaden their reach to more people.
FinTech companies allow banks to cut operational costs and use AI to find and assess client information faster. This greatly challenges the more traditional banks, which can take weeks to look over a loan application. With everything online, physical bank branches are becoming less needed. AI and machine learning allow for a better grasp of business evaluations and risks.
However, the growth of FinTech having outpaced online security has allowed for more sensitive information to be vulnerable online to hackers. As well, regulations in the cyber-spaces, like crypto are often messy, and government compliance is a common problem that online lenders have trouble with. Lastly, even though banking online is easier and faster, it does take away a personalized side to banking.
Loan Brokers, unlike FinTech companies, provide the customized approach some clients need. Additionally, brokers are aware of which lenders are trustworthy, under compliance, and safe and will point your business in their direction to get a tailored funding solution.
The Customer Experience
Online solutions may be easier, but as mentioned above, lack personal attention and the ability to provide a customized solution for your business’s needs. On the other hand, traditional banks usually promote their own products and services to their clients and won’t refer other lending services. They also need to be careful with how they advise their clients to minimize risk.
Loan brokers working with multiple lenders are not constrained by loyalties to one lender or another. When working with a client, a loan broker’s sole focus is securing the best funding solution for you. With a loan broker, you will have access to many funding options and sources while getting the attention and customization your business needs to grow.
At Capital Quickly, our brokers work tirelessly to study our loan applications and pair them up with the most suitable lenders in our extensive suite of lenders we work with. We ensure that your business will get the attention it deserves and that we can find you the best funding solution possible to help your business grow.
Begin your process today and get funded in under 48 hours!