How FinTech Is Disrupting Business Loan Disbursement

Jan 2018 | Team Rubique

The process of business loan disbursement is a complex and lengthy one. For small to medium businesses, this means trouble. They need the money to survive. And, on top of that, most of them do not receive the amount of funding they actually need. Usually, most business owners would approach the traditional banking institutions for loans. And, this was the only way to acquire business loans until recently.

But, things have changed now. FinTech companies now provide easy business loan disbursements. While these companies are not new, most of them did not exist before the 2000s. But, one thing is for certain, they have settled in an untamed territory in the financial world and they mean business.

What Is FinTech?

FinTech is the shorter form of Financial Technology. Any advanced technology used in the world of finance is basically FinTech. Some banks have started using FinTech but the guys who first started it disrupted the world of banking forever. FinTech companies are able to judge a business’s presence as a whole, including offline and online. This has become a necessity in the new world. For small businesses, this is a great thing. They get access to more funds. FinTech companies use this tech to their advantage and ensure that businesses can carry on with their tasks without any hassle.

FinTech companies have disrupted the market by filling a void. This void was caused by the banks themselves as the tedious process of business loan disbursement proved to be difficult for many startups and medium-sized businesses. So, the FinTech organizations provided faster, smoother approval. The banks would consider small loans unworthy of their time. Hence, it was easy for these companies to come in and conquer the market for business loan disbursement.

The Disruption

FinTech companies have caused this disruption by changing the process of loan approval. Now, lenders analyze the entire portfolio of a business. So, this includes bank and credit card statements, balance sheets, tax returns, and anything else that will paint a complete picture of a company’s finance.  So, the process itself is a complete one.

With so much paperwork, you might be wondering, how can that be easy, right? Well, all these help FinTech lenders provide loans to businesses with low credit score and no collateral. For example, an SME which has no credit history, or much in terms of collateral. Then, how on earth will it be able to secure a loan? How will it run its business without any money? This is what has changed. This has enabled countless SME businesses to live their dreams.

The innovations of FinTech has changed the process of lending. It has given rise to peer-to-peer lending and created a more user-friendly structure of loaning money to businesses. Coupled with a fast approval process and funding time, no wonder it has become a fan favorite among most business owners.

A new market has opened up for these companies as small businesses lineup every day to get their loans approved. They don’t have to deal with the banks anymore and the chances of their loan not getting approved have decreased considerably thanks to FinTech.

Unlike traditional banks, these companies gather data and use it to determine how likely it is that a borrower will repay the loan. So, it is an accurate process that judges the business as it is. They use data from all sources to get a clearer view of things. Nowadays, it has become easier to crunch all of this data in a matter of seconds and automate the process. This process includes risk assessment as well as the resulting loan approval. Since automating lowers the costs, it is easier for these lenders to provide better interest rates as well.

FinTech companies are tech-savvy in nature. So, security is one of their top concerns. With a lot of sensitive data exchanging hands, they have several safeguards in place to protect details of their clients. One can say, that they have better securities than the banks themselves.

Present And The Future Of Business Loan Disbursement

FinTech provides its customers with a lot of benefits. In fact, to remedy the situation a lot of banks themselves have opted to consult and seek the help of FinTech organizations. They have teamed up to provide better service to their customers and new clients. These partnerships have proved to be a win-win for all parties involved. The banks and FinTech companies are happy with their new arrangement and business owners are getting the best of both worlds.

In the future, FinTech is likely to become a central pillar of financial transactions. It can help promote transparency and efficiency. The way things are going, this is certainly going to be an industry to watch over for years to come.