The little secret about big bank loans is that they mostly go to big businesses. Small business is still barely visible on their radars, due to various factors, with only a quarter of loan requests fulfilled. Although the gradual increase in interest rates has helped increase loan sanction rates, there is still a long way to go before small businesses can breathe easy when it comes to finance.
One reason for the tiny visibility of small businesses is that the processes and criteria of institutional investors aren’t geared to take them into account. Loan is about risk and their risk assessment tools and methods aren’t designed to measure small businesses. Nevertheless, lending to small businesses has risen by seven percent in 2017. The increasing hurdles to access institutional loans have turned small ventures towards fintech and alternative finance, which have had a golden time in 2018.
Online loan services have mushroomed a lot in the past few years. Their biggest advantages lie in short processing times and low norms for approval. A home based venture, startup or entrepreneur need not waste time in proving their track record, and quickly get a small loan without heavy collaterals. The interest rates here can be high. Some online loan services even have live data analysis to check an entity’s operations and performance.
Loan aggregators online make it even easier to find a lender. These are platforms that connect a loan seeker with the best matches from amongst various lenders. The options too are diverse, and users can find anything from short loans and cash advances to mortgage, find equipment loan, or loans for buying other businesses, etc.
Finally, the blockchain technologies are booming and there will be interest in offering financing over the blockchain, which is transparent and decentralized. These could be very fast, effective and lead to a new transformation in the lending space in the years to come.