How Financial Technology is Evolving for Small Business Lending

With access to capital at your fingertips available through fintech. The finance landscape is evolving for small business.

09:39 02 March 2020

The one thing that all nearly 30 million small businesses (and big businesses too, for that matter) in the United States have in common is the need for cash and capital to not only get their business up and running but to build, grow, and expand their entrepreneurial dream.

At the same time, getting access to the cash and capital small business owners need sometimes just to keep their businesses open is one of the biggest challenges entrepreneurs face today.

In fact, according to the US Small Business Administration a lack of funding and financing is the number one reason that small businesses have to close down. Combine that with the fact that traditional lenders are only approving less than 30% of small business loans and you have a recipe for disaster.

Thankfully though, the world of Financial Technology (FinTech) is aggressively innovating new solutions specifically designed at helping entrepreneurs and small businesses leverage modern and nontraditional financing options to meet this almost overwhelming demand.

Leaders and startups in the FinTech community set out to better serve entrepreneurial clients that are having a tough time getting the cash and capital they need to invest in equipment, handle payroll, cover cash flow issues, and expand via opportunities they would have missed out on before.

FinTech financiers are also serving entrepreneurial communities that were historically underserved by traditional lenders, too. Female entrepreneurs, minority entrepreneurs, and entrepreneurs in industries seen as “uncertain” – especially in the startup community – are now able to take advantage of financing options they would have had a difficult time securing in the past.

On top of all that, the FinTech community is also reshaping the entire banking and traditional financing industries from top to bottom, too. This is forcing a lot of competition on industries that haven’t had to deal with a “revolution” in their businesses for what feels like hundreds of years, compelling these usually slow to innovate companies to offer better solutions and better deals.

Below we highlight just a few of the most impressive new FinTech solutions introduced by companies like Excel Capital that are totally transforming the way that small business owners and entrepreneurs secure the financing they need to make their business dreams a reality!

Educational Solutions

One of the many reasons behind the financial crisis that occurred in the mid-2000s (The Great Recession) was a general misunderstanding of how the world of business finance worked from top to bottom to begin with.

Because entrepreneurs weren’t “up to speed” with the cutting edge approaches that financiers were moving forward with – approaches that allowed them to game the system and offer really risky (and high-interest rate) financing options packaged as fantastic deals – they were more easily taken advantage of than they might have been otherwise.

Today there are a lot of FinTech solutions specifically designed to provide entrepreneurs with a more accessible business finance education, and do so in record time without a lot of the “textbook” or dry material that turns busy entrepreneurs off so frequently.

Many of these FinTech solutions common application form, are provided via quick video training programs, and are generally able to be tailored specifically to the industry that an entrepreneur or small business is operating in – giving business owners semi custom financial advice and education about the financing options they have available to them.

Compliance Assistance

There are also a lot of FinTech organizations and solutions out there today aimed at providing better compliance assistance to entrepreneurs and small business owners that want to take advantage of traditional financing options big banks and lenders offer.

In the wake of The Great Recession a lot of new rules and regulations were clamped down on the banking, business finance, and lending industries. This means that those looking to take advantage of loans and financing from these lenders have to be in full compliance with new rules that might have only existed for 10 years or so, rules and regulations that can change more frequently than they used to in the past.

Many of the new FinTech solutions designed with compliance assistance in mind are almost effortless to use, providing entrepreneurs more transparency about the compliance process and helping them better prepare their financing applications so that the process moves faster.

Payment Processing Solutions

Payment processing solutions have definitely grown by leaps and bounds over the last few years, spurred on by a FinTech community looking to give entrepreneurs more control, more transparency, and more data about their businesses finances – particularly when it comes to accepting payments online.

A number of these payment processing solutions cut out traditional merchant accounts almost entirely, acting as merchant accounts and payment gateways in a sort of all-in-one approach, making it more affordable – and more accessible – for entrepreneurs to leverage these kinds of payments solutions.

With a more streamlined payment system and more data available business owners and entrepreneurs have a much easier time getting approved for traditional and nontraditional lending opportunities.

These FinTech based options have not only made it easier to accept payments but have also made it easier to manage cash flow, cash flow projections, and even to use a business’s Accounts Receivable as collateral through nontraditional financing programs.

Non-Traditional Lending Options

Of course you also have a wide variety of FinTech companies specifically diving headfirst into the nontraditional lending industry, including companies like Excel Capital Management that leverage technology to provide business owners with financing and funding in record time (often inside of three hours after approval) when they might not have had access to funding through traditional sources before.

These kinds of nontraditional lenders are using a combination of automation when it comes to underwriting and advanced algorithmic/AI technology to figure out whether or not entrepreneurs and business opportunities are smart investments from a financing standpoint – taking into account data points that traditional lenders either aren’t looking at or are undervaluing.

Combine all of that with a general business friendly attitude especially when it comes to small business owners and entrepreneurs and it’s easy to see why so many seek out these nontraditional lending solutions from companies like Excel Capital even when they could have gone the more traditional route with big banks or national lenders.