Not all businesses have the good fortune of thriving in a financially stable ecosystem. Countless companies have to struggle regularly for funds, and there are not enough resources to power their decision-making processes. Nonetheless, entrepreneurs who are running small or medium-sized businesses or even start-ups need the same amount of financial support and experience as the successful conglomerates of the day.
Rising technological advancements are helping to bridge the gap between the financial need of the MSMEs and the potential lenders. This new wave of Fintech services has made it possible to reduce the rate of failure among new start-ups and SMBs. It is helping in the better distribution of available funds and resources among different businesses. It is changing the way business owners, and proponents have perceived funding. Since the advent of better networking facilities between business owners and lending agencies, the process of application and approval has become a lot easier.
Fintech closes the financing gap for MSMEs
After the economic crisis of the mid-2000s that continued well into 2012, there was a sharp rise in the number of tech-savvy companies that offer financial support to aspiring entrepreneurs. These Fintech companies have revolutionized the concept of commercial finance as well as personal finance. From refinancing mortgages to redistributing small business loans, the Fintech companies provide all kinds of services to businesses in need. For a complete list of services that these platforms can offer, visit Sunwise Capital today.
Fintech alternative financing
Apart from the conventional small business loans, the Fintech alternative financing options are the most popular among micro, small and medium businesses. These are competitive replacements of SBA loans since they come with the same benefits, but they do not involve the same levels of complication associated with bank loans. Their repayment terms usually vary between one and five years. The interest rates can range between 9% and 25%. Most SMBs and start-ups can access funds within 24 hours or a couple of days instead of waiting for weeks as was in the case of traditional loans.
Cash advances and invoice factoring
These comprise a considerable part of the new Fintech revolution. A business can avail cash advances on merchant checks and invoices that are pending payment. These are equivalent to accessing the cash you already own. Just forward the documents to the merchant cash advance companies and get an advance on your payments. Later, when the vendor or the seller pays you, the Fintech company takes a percentage of the amount.
Invoice factoring is a similar process, but the risks involved are much lower. While merchant cash advance costs depend on projected sales, invoice factoring mostly just relies on your already existing invoices. Most experts recommend invoice factoring over merchant cash advances due to quicker payments, lower costs and lesser risks involved.
These financing options are usually short-term and involve about four months to 2 years of repayment period. From real estate agents to software vendors, anyone can opt for cash advances thanks to the digitization of business finances.
The Fintech SBA loans
Several banks and conventional credit unions are now being able to finance businesses within a couple of days, thanks to the adoption of financial technology tools. They now have the power to verify credit scores and other documents within minutes due to the quick availability of all the information on the web. Contrary to the traditional SBA funding process that takes weeks to months, the new Fintech supported SBA loan process takes about 7 to 10 business days at the most.
It is great for the owners of micro, small and medium businesses as well as start-ups. Term loans and lines of credit are both types of small business administration loans that entrepreneurs can use for consolidation, refinancing, scale-up along with basic business operations and working capital. The interest rates start from as low as 6%, and the repayment terms can extend from 3 years to 10 years depending on your choice.
Peer to peer lending
Peer to peer or P2P loan is one of the most excellent perks of online funding platforms. This financing model bypasses the need for all kinds of credit record verification processes, and it eliminates the necessity of a middleman for the approval of loans. Small businesses and startups benefit on a regular basis from signing up on P2P lending sites. Entrepreneurs who want to enjoy lower interest rates or those with poor credit scores can opt for social lending or crowdlending services like these.
A P2P loan can have multiple sources, and each month, you may have to pay various lenders individually for the loan. Nonetheless, finding financing through P2P lending platforms is much more comfortable for amateur entrepreneurs and multiple loan holders as they would find it difficult to fund their business from traditional sources.
The general advantages of working with a Fintech company
Aside from providing smooth funding to several types of businesses, the Fintech companies also integrate many services on one platform. They offer cloud-based banking and accounting services that support client payment and vendor payment via credit card, debit card, ACH transfer, and check. They help in receiving payments and also in online bill payment. You do not have to switch apps or platforms to pay multiple parties or accept payments. It saves time, effort and money. Financial technology allows you to enjoy numerous facilities on the same platform.
The Gen X and the millennial population live within their social media applications and their mobile devices. Android, iOS and Windows mobile devices are now powering the lives of millions of Americans each day. Almost 92% of the urban population has at least one mobile phone. Therefore, it gives the prime opportunity to the Fintech companies to reach out to their potential customers with improved user experiences that traditional lenders including banks cannot provide. More than the availability of secure funding, business owners are also getting the chance to explore more options. It is possible for them to land sweet deals merely because they have the facilities required for comparing all the services and choosing the best ones for their needs.