Alternative financing is a type of funding outside the conventional finance systems of capital markets and banks. Fintech (Financial Technology) is the environment within alternative finance that includes technology, companies, and processes. All are aimed to improve the conventional financing methods in categories like equity financing, crowdfunding, payment and invoicing, and international money transfer.
Initially, fintech referred to tech used in the traditional financial industries. However, the term has expanded since the beginning of the 21st century to include modern financial technologies like online lending and cryptocurrencies.
Like mentioned earlier, alternative funding includes non-bank options for small businesses such as venture capitalists and angel investors. They are not considered full-scale banks because they do not engage in both accepting deposits or lending.
A few forms of non-bank lending include accounts receivable financing, merchant cash advances, and invoice factoring. Here, small businesses get funding depending on their accounting data like pending invoices and future sales.
Fintech lending/ Online Lending refers to modern non-bank lending methods, made possible through technological innovation. Small businesses are opting for online lending rather than getting a loan from a bank. You will find that small businesses lack a strong credit history, something that most banks require before giving you a loan. On the other hand, lending companies provide quick cash to small businesses, making them an ideal alternative financing source.
Online lenders are similar to banks where you apply for a loan. The difference is that online lenders factor in things like sales history, cash flow, social media interactions, and online reviews of the small business.
Why Small Businesses Are Opting For Online Lending
Listed below are some of the reasons small businesses prefer online lending as an alternative form of financing.
A quick approval- One can apply online and find whether they have been approved, the amount they can borrow, and the payment plan.
Low fees- You will find online lenders charging lower service fees or even interests because most of them do not deal with the cost of having a physical location.
An easy approval- online lenders are much more flexible compared to traditional banks, which makes it easy for you to be approved for a loan.
Alternative financing can be good for your business, especially if you need cash to jump into a profitable opportunity. If your small business is at the point where you need money to keep the business running, First Source Capital can offer you a solution.