In our last post, we looked at how traditional banks and alternative lenders can work together to give businesses more financing options. Now, we’re zooming in on one of the biggest forces driving that growth — fintech.

Technology has changed how we function. It has rapidly expanded the nature of how we connect and work together globally.

Businesses and business financing aren’t the exceptions to this. Financial technology has changed the way small- to medium-sized businesses access capital that, before now, they traditionally had less access to, opening doors for these businesses to further grow.

Fintech’s influence will continue to ripple in the finance world as technology advances, but here are four key impacts our industry has had so far.

Providing More Access To Capital

The stringent and often rigorous requirements traditional lenders have can unintentionally close the door on business owners seeking to expand via a business loan. The terms entrepreneurs are often offered can make accessing the capital they need to grow a more arduous task than it really needs to be. The existence of so many digital lenders levels the playing field, giving small-business owners more access to capital.

Making Bill Pay Easier 

Long gone are the days of hardcopy bills and daunting stacks that need sorting through to ensure business owners stay on top of operational costs. Fintech has empowered business owners across the world to track their transactions and funding at the swipe of a finger or click of a mouse, from the comfort of their own homes. Notifications and automatic draws help keep business owners accountable to ensure they never miss a payment and help them better plan the comings and goings of their capital. 

While this is something that traditional lenders have also started to offer in recent years, fintech is rooted in the technological space. These companies are constantly at the forefront of the future and striving to make paying as easy as possible, with waves of innovation regularly being pushed out by this ever-growing industry. Innovation is surely something that all sides will benefit from, as this challenges traditional lenders to keep up with the changes that fintech continues to make.

Speeding Up The Time To Access Capital

When it comes to technology, speed is of the essence. We want to have the fastest internet speeds, the quickest processing power, so why would accessing capital be any different? The advancement of today’s AI has allowed fintech companies to customize their algorithms so businesses are pre-approved in less time.

The fintech industry has cleared so many of the hurdles that small businesses faced by cutting down on the eligibility paperwork required for capital, resulting in less time working on applications. This is especially important for businesses that need funding as soon as possible.

Spurring More Competitive Rates

Competition is good for business, but it’s the business owners who stand to benefit the most in the fintech world. With so many players in the alternative financing game, companies have to keep their rates competitive, allowing entrepreneurs to shop around while empowering them to make the best choices for their business in the short and long term.

While traditional banking generally has stringent policies and rates, fintech companies are changing the rules by offering more flexible rates and shorter term lengths, such as 16 months.

Navigating The Path Ahead

When investigating funding options for your business, it is always important to consider that no solution comes without its caveats. The world of fintech is still relatively new, and the water is still being charted, with many legal constraints and regulations shifting around the industry as it continues to build. Due to the industry being so new, business owners have much less of a track record to go off of when comparing fintech and traditional lending options; however, this will change over time.

It is also worth noting that the standard loan term the fintech industry offers can be quite different from what entrepreneurs would expect from traditional lenders. This stems from fintech lenders catering financial services to those who are often left behind by traditional lending restrictions, such as those with lower credit ratings, or even marketing to those who would rather have shorter-term loans than what is traditionally offered. This helps by balancing access to capital so that more businesses can grow.

Fintech is also restricted in terms of its process. Being rooted in the technology space may deter entrepreneurs who are less tech-savvy or who are easily deterred by an online application process. As it grows, the fintech industry may look to traditional lending methods to extend its reach and take aspects of the more human-oriented approach to further support small-business communities or further educate to ensure the application process is accessible to all.

Fintech has opened new doors for small and mid-sized businesses — speeding up approvals, increasing access, and pushing traditional lenders to innovate. Still, every option comes with trade-offs, and it’s important to know which type of short-term financing best fits your goals.

In the next post, we’ll break down six types of short-term financing — including when to use each, what to watch for, and how OwnerCo’s lending partners can help you find the right match for your business.

Explore OwnerCo’s lending options to see how our tailored solutions can help move your business forward.