4 Ways Fintech Changed Business Finance

Xan Myburgh is CEO + Co-Founder of Backd Business Fundinga leading alternative financing solution.

Technology has changed how we work. It has rapidly expanded the nature of how we connect and work together globally.

Companies and corporate financing are not the exceptions to this. Financial technology has changed the way small and medium-sized businesses gain access to capital that they previously had less access to, opening doors for these businesses to grow further.

Fintech’s influence will continue to ripple through the financial world as technology advances, but here are four key impacts our industry has had so far.

Provides more access to capital

The strict and often strict requirements of traditional lenders can inadvertently close the door for business owners who want to expand via a business loan. The terms entrepreneurs are often offered can make accessing the capital they need to grow a more demanding task than it really needs to be. The existence of so many digital lenders levels the playing field and gives small business owners more access to capital.

Makes invoice payment easier

Long gone are the days of paper bills and daunting stacks that need to be sorted to ensure business owners stay on top of operating costs. Fintech has enabled business owners around the world to track transactions and funding with the swipe of a finger or the click of a mouse, from the comfort of their own homes. Alerts and automatic draws help keep business owners accountable to ensure they never miss a payment and help them plan how capital comes and goes.

Although this is something that traditional lenders have also started to offer in recent years, fintech is rooted in the technological space. These companies are constantly at the forefront of the future and strive to make payments as easy as possible with waves of innovation regularly pushed out of this ever-growing industry. Innovation is certainly something that all sides will benefit from, as this challenges traditional lenders to keep up with the changes that fintech continues to make.

Accelerate the time to access capital

When it comes to technology, speed is of the essence. We want to have the fastest internet speeds, the fastest processing power, so why should access to capital be any different? The advancement of today’s AI has enabled fintech companies to adapt their algorithms so that businesses are pre-approved in less time.

The fintech industry has removed so many of the hurdles small businesses faced by cutting down on the qualification paperwork required for capital, resulting in less time spent working on applications. This is particularly important for businesses that need funding as quickly as possible.

Encourage more competitive prices

Competition is good for business, but it is the business owners who stand to benefit the most from the fintech world. With so many players in the alternative financing game, companies need to keep prices competitive, allowing entrepreneurs to shop around while empowering them to make the best choices for their business in the short and long term.

While traditional banking generally has strict guidelines and pricing, fintech companies are changing the rules by offering more flexible pricing and shorter durations, such as 16 months.

Navigating the way forward

When researching financing options for your business, it’s always important to remember that no solution comes without caveats. The fintech world is still relatively new and the waters are still being charted, with much of the legal strictures and regulations shifting around the industry as it continues to build. Because the industry is so new, business owners have much less of a trail to follow when comparing fintech and traditional lending options; however, this will change over time.

It’s also worth noting that the standard loan term offered by the fintech industry can be quite different from what entrepreneurs expect from traditional lenders. This stems from fintech lenders providing financial services to those often left behind by traditional lending restrictions, such as those with lower credit ratings, or even marketing to those who would rather have shorter terms than what is traditionally offered. This helps by balancing access to capital so that more businesses can grow.

Fintech is also limited in terms of process. Being rooted in the technology area can deter entrepreneurs who are less tech-savvy or who are easily put off by an online application process. As it grows, the fintech industry can look to traditional lending methods to expand its reach and take aspects of the more people-oriented approach to support the small business community or further educate to ensure the application process is accessible to all.

Every day, technology becomes more sophisticated and accessible, which can ultimately benefit small business owners. Technology will continue to change how we operate with doors previously closed to small businesses being kept open so they can continue to grow.

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