There has been the rise of FinTech and payment businesses try to create solutions to the small and medium enterprise. The solutions that these startups are providing include crowd lending, digitization formalizing business processes as well as invoice-backed factoring.
Because these startups already know the pain points of such small businesses, they are trying to address these pain points. This has increased competition in the banking industry, thus the need for traditional banks to modernize if they are serious about retaining their customers.
Thanks to some of the banks that are not taking the emergence of FinTechs as competition. Instead, they are building partnerships with these FinTechs.
For example, Kansas INTRUST Bank just partnered with Funding Circle so that they can provide loans to small businesses in the United States. If you are a small business, you don’t need to be told. Just get a business cash advance.
The partnership between Funding Circle and Kansas INTRUST Bank has bored some fruit. Funding Circle has managed to fund up to $5 billion in terms of loans across the world. Besides, their partnership with Kansas INTRUST Bank enables them to offer legitimate services while also providing more opportunities to small businesses.
Now, if you aren’t aware of how these partnerships mutually benefit from each other, this is how: The startup will assist in bringing in technical expertise and the experience that is required for it to run smoothly. On the other hand, the banks will be the ones responsible for providing capital channels.
When the financial crisis hit in 2008, small business credit across the world faded away. Maybe you can now hear about them because it’s opening for a second time after the 2008 crisis.
During this period, many banks couldn’t manage to rate and finance small and medium business enterprise credit, and as a result, the government had to come in.
Even though the government came in to offer their assistance, it hasn’t been stable as most people would think. This is because funding in most cases will be politically contentious, making it unsuitable for small businesses.
That’s why you can see small and medium enterprise sought to move towards the direction of financial technology that can offer better financing services and agile, which suit their needs.
Now, what you must understand is that giving credit to small and medium enterprise isn’t easy. The fact that they aren’t big enough and therefore lack credit ratings or maybe the assets make it difficult for lenders to qualify them for loans.
Bottom Line
In most cases, banks want a business applying for a loan to have at least twenty-four months of official invoicing. Sadly, banks will not be in a position to offer you credit if they are unable to verify your creditworthiness. This is because they will stand a chance of running severe losses if they offered most businesses without verifying their creditworthiness.
Author Bio: As the FAM account executive, Michael Hollis has funded millions to get a business cash advance. His experience and extensive knowledge of the industry has made him finance expert at First American Merchant.
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