All small businesses need funds – to expand, manage cash flow, upgrade equipment, you name it – but while there are several different financing options available, loans remain one of the most straightforward ways to access extra funding.
Unfortunately, for many small businesses, traditional loan applications are not only slow but also riddled with hoops to jump through (good personal and business credit score, of course, but also decent monthly or annual revenue, the right number of years in business, etc.).
But not all is as bleak as it might seem: namely, technology is helping cut out unnecessary steps and speeding up approvals. From AI-driven profiling to blockchain verification, innovative tools are making it easier and faster to get the financing you need. Here’s how these advancements can simplify your loan experience and keep your business moving forward.
Why Small Businesses Struggle with Traditional Loans
We don’t think we’ll surprise anyone by saying that big banks aren’t always small-business friendly. This is because traditional lenders tend to favor larger, established businesses with predictable income and hefty collateral. Your small bakery, plumbing service, or design studio may be promising but not check all their boxes.
On top of this, conventional loan applications can be painfully slow. You submit documents, wait for weeks, only to get tangled in back-and-forth questions or rejections. What business has time to play phone tag or manually dig up financial statements from years ago?
How Technology Streamlines Loan Applications
Technological advances are turning once slow and complex loan applications into something you can tackle between client meetings. Here are some ways tech simplifies the process:
- Online Applications and Documentation: You can now complete loan applications online, often within minutes, so skip bank visits. Platforms like Fundbox, Kabbage, and OnDeck let you upload documents, verify identity, and sign agreements digitally. This way, you’re not tied to banking hours—apply at 11 p.m. in your pajamas if you want.
- AI-Driven Profiling: Artificial Intelligence (AI) is speeding up eligibility checks. Instead of manually going through paperwork, AI systems analyze your credit history, cash flow, and business performance. This often leads to quicker approvals and personalized loan offers that actually suit your business needs.
- Blockchain-Based Verification: Security concerns? Blockchain simplifies and secures the verification process. This technology creates an immutable ledger of your financial data, making fraud less likely and document validation faster.
- Automated Credit Assessment: Instead of just relying on your personal credit score, automated systems can assess your business’s overall financial health. Fintech lenders analyze your sales data, invoices, and even your customer payment patterns. Don’t worry, this broader picture often works in your favor, especially if your business is growing quickly.
Types of Small Business Loans to Consider
Tech-driven solutions aside, you also need to know your loan options.
- Term Loans: These are fixed-sum loans that you repay over a set period, usually with a fixed or variable interest rate. They’re ideal for large, one-time expenses like equipment purchases, renovations, or business expansion. Many fintech lenders offer quick, online term loan approvals to streamline the process.
- SBA Loans: These loans are backed by the Small Business Administration and offer favorable terms, such as lower interest rates and longer repayment periods. They’re great for expanding your business, refinancing debt, or buying equipment. While SBA loans traditionally involve more paperwork, many platforms like Lendio simplify the process, letting you apply for SBA loans online and track your application digitally.
- Lines of Credit: A flexible option that gives you access to funds up to a set limit, allowing you to borrow only what you need and pay interest on that amount. This is especially useful for managing cash flow gaps or unexpected expenses. Tech platforms make it easy to manage and draw from your line of credit digitally, 24/7.
- Invoice Financing: This option lets you leverage your unpaid invoices to get immediate cash. Instead of waiting 30, 60, or 90 days for clients to pay, you receive an advance on those invoices. It’s ideal for businesses dealing with slow-paying clients. Online lenders streamline this by automatically pulling invoice data from platforms like QuickBooks or FreshBooks.
- Merchant Cash Advances: If your business processes a lot of credit card sales, a merchant cash advance gives you a lump sum in exchange for a percentage of future sales. It’s useful for short-term needs or quick investments. Fintech platforms handle the repayment process automatically, taking a portion of each transaction until the advance is repaid.
Each loan type fits different scenarios, but with today’s technology, applying for them is faster and simpler than ever.
Tech-Driven Future of Small Business Lending
If you like the tech innovations you’ve seen so far, you’ll like the future even better, as you can expect even smarter technologies. Voice-activated loan applications, automated repayment schedules, and personalized loan recommendations based on your business’s growth patterns are on the horizon.
Learn about these technologies now so you can leverage them to make your loan applications easier and give your business the flexibility it needs to thrive. Stay ahead, and you’ll never be held back by outdated processes again.
To read more content like this, explore The Brand Hopper
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