According to the 2015 Small Business Credit Survey, only 51 percent of small-to-medium-sized businesses (SMB’s) get loan approval and other sources of funding from the big banks and other established institutions. This kind of situation effectively limits their productivity and any plans for growth and expansion. It is one major reason why many of them are seeking help from Fintech companies which are usually startups. Based on statistics, they have no cause for regret.
SMB’s need a fresh flow of funds every day to maintain operational expenses. They need access to emergency monies to pay payroll and meet service-level agreements in case a huge client was not able to make a sizable payment. The speed with which they can access those needed dollars is also critical to maintaining their business continuity. The faster they can cut through red tape and its months-long processing, the easier their owners and their employees can breathe easy.
Take a look at three concrete examples of how Fintech is attracting – and keeping – SMB’s:
As described by Small Biz Technology, loan platforms can provide an SMB its needed monies in just 24 hours after a request has been made. The SMB owner also can have several options in sourcing his funding. Once he places his request on a loan platform, various lenders can contact him and show him the amount they can loan, date of fund release, interest rate, terms of payment, and other things that he needs to know to complete his transaction. The number of lenders who approach him give him a variety of choices, and he can select what he perceives to be the best deal. This kind of accessibility and convenience has made Fintech companies like LendGenius.com draw in six million loan originators in just three months.
Another way that Fintech companies is providing SMB’s a steady stream of monies is through e-commerce and market expansion. Cuffelinks give as examples online payment processors like Paypal which act as a bridge for consumers to buy products from the SMB and pay simultaneously online through credit card transactions or cash fund transfers. Real-time sales facilitated by Fintech platforms like these allow the SMB owner to tap into funds from these transactions that go immediately into his account. His store does not close at 6 p.m. Moreover, as e-commerce expands his business’ reach to other parts of the world, foreign customers can buy from him, making his business activity ongoing 24/7.
Finally, SMB’s can attract investors online and real-time through Fintech crowdfunding platforms. Through sites like Wealthmigrate.com, they can promote their products, services, causes, and campaigns and invite interested parties to contribute in exchange for a stock or a share. This flexibility gives SMB owners access to a wide range of investors who are not constrained by their social class financial capabilities, or access to members of the elite country club. A middle-class school teacher can contribute by as little as $50 a share, while venture capitalists can easily wire thousands or millions of dollars to the SMB if they find his project promising. The Crowdfund Insider says that this platform is one growth area as investing in crowdfunding sites has leaped from $11.4 billion in 2014 to $36.49 billion in 2015. It names real estate, oil, gas, and services with positive social impact as the business areas that will draw in large numbers of crowdfunders in 2017.
Quick access to loans and shareholders, as well as availability of funds through e-commerce sales, can help SMB’s sustain their operations without wasting a lot of time in the bureaucratic jungle. This is why many of them are turning to Fintech as a viable and long-term option.