For companies to grow, they need to have enough capital. In most cases, this is usually in the form of money from banks and other financial institutions. However, in Australia, it is mainly big companies that are offered this assistance. Small and medium size companies are therefore left out without any form of financial help.
Fintech companies noted that there is a void in the banking industry and came up with a solution. They offer online lending services to small and medium size businesses. Through these online lending institutions, small business owners can get the funding they need and cannot get from banks.
They provide finances for small businesses in a simple and fast way. Examples of online lending companies include OnDeck, Moula, Kikka, Loan desk, Prospa and many others. Fintech companies do this through the different financial packages that they have. Some of the services they provide include:
- Unsecured business loans to increase the working capital. There are a lot of lenders who are now offering short term loans that do not require you to own property as the case with banks.
- They also offer a line of credit which also does not require property as a form of security.
- Invoice finance to boost the cash flow in the business which helps in making the business grow faster. Businesses are also able to get funding for any unpaid invoices they might have.
- Other forms of finance which include equipment finance to purchase new equipment for the business. Fintech companies also offer 2nd mortgage funding.
Fintech companies do not consider themselves to be threats to banks or threatening to overtake the banks in the finance industry. Online lending companies provide an opportunity for non bank lenders to access the small business industry that has a lot of un-met demand.
Banks do not give loans to such small businesses since they consider them to be too risky. This leaves small businesses left with only one option that is to go to online lending forums to seek financial assistance.
Online lending companies, on the other hand, offer risk-based rates for business loans taken by small businesses. Fintech companies do not offer lower rates than those offered by banks. The feature that makes these businesses stand out is the fact that they offer fast loan approval services that make hours instead of the weeks it takes to have a loan processed in a bank. The amount of documentation required to apply for a loan is also very little as compared to banks.
Fintech helps small businesses through various means. For instance, though crowd finding that enables small businesses to raise funds through appealing to the general public that also broadens the number of potential investors.
There is also peer to peer lending. This is a more flexible lending source that can also be said to be cheaper. This is mainly because in peer to peer lending, the risk is assessed well compared to banks. This is also because of the technology that they use. Also, they do not have the large overhead costs that banks have since they conduct their business only online.
Also, there is online lending. This is where non-bank lenders can use technology to ensure that getting a business loan is done faster and more efficiently compared to banks. This is beneficial to small businesses since they can receive the money within a short time and the loans are also more flexible compared to those offered by banks. The loans are usually short term with flexible payment options that are suited to the borrower’s financial status.
Online lending companies provide financial assistance to companies and businesses in all stages. This is from those who need startup capital, early growth businesses, rapid growth and mature growth businesses.
For those people who are interested in starting businesses and do not know where they can get the capital they need, they should look to Fintech companies and go through all the types of financial services available which may suit their needs. Fintech companies have found a way to solve the problem faced by small businesses when it comes to obtaining business finance.