Technology has revolutionized the world and the business world is no exception. Apart from helping businesses in operations and innovations, technology has empowered small businesses.
The biggest concern for small businesses is arranging adequate funds. So, technology has made the process of loans faster and more transparent, enabling small businesses to operate and grow. It won’t be wrong to say that technology has a significant role in their success.
Technology has made the financial sector more dynamic and comprehensive. Recognizing the potential of Technology to arrange accessible Credits and enhance productivity, 42% of Small to Medium-sized businesses (SMBs) have increased their investment.
Let’s learn about the problems faced by small businesses to get credits. Also, technology has benefited in getting quick, easy loan access.
Challenges faced by small businesses to get Loans
Every business needs funds to work, but it is more difficult for small businesses to arrange it. They go through several phases, like the start-up and growth phases, and need adequate resources. Some significant challenges they face in accessing loans are:
1. Difficulty in Bank Lending SMBs plays a vital role in every country. They provide jobs, the scope for innovation, and a platform for employees to excel in their careers. But, their overall contribution in terms of revenue is comparatively low. For this reason, they face difficulty in accessing bank loans. Also, sometimes they have high translation and investments with improper paperwork that decrease their chances of gaining loans.
2. No private investors
Private investors often don’t want to invest in private investors because they are less profitable. Despite leveraging high-interest rates, it won’t be beneficial for them. Sometimes, when private investors do agree, they have specific demands or conditions for returns or management.
3. Improper Paperwork
Big businesses have dedicated teams of an expert who creates and maintains paperwork. But, only one or two individuals look after such tasks in SMEs. Sometimes, the owner or manager is responsible for this additional task. Consequently, it may have poor quality. So, this improper or low-quality paperwork is challenging for them to access loans.
These are some challenges for SMEs to access credit. Now, let’s tell you how technology can fill the gaps and enhance SMEs’ access to loans.
Six benefits of technology in the Business Loan Industry
Technology plays a vital role at various levels and improves the gaps in the Business Loan Industry as follows:
1. Enhances Data Sharing
SMEs can integrate and share their data using Technology. For instance, data on bank accounts, loans, invoices, and eCommerce transactions can be easily compiled and maintained using Technology. It helps to analyze the risk involved in Credits and improve their data quality. Moreover, it helps to reduce credit expenditure and make financing more simple.
2. Creates Loan personalization
Technology enables lenders to make better loan offerings. Also, they help lenders and loan providers tailor-make various loan packages. Such packages can help SMEs to get better-personalized loans for them. Also, they can choose the one that suits their needs among the various loan packages.
3. Made loan Application Faster
Small businesses must give a lot of information and data while applying for loans. But, the majority of this information is also available online. The use of technology can make it easy to collect and submit information.
Also, it improves the verification process. Consequently, humans can skip organizing and reviewing such paperwork, which makes it easy to apply for loans. Moreover, technology has sped up the loan application process to get quick access to loans.
4. Helps to serve the different sections of society
The underserved section of society, like women and minorities, often get ignored by the small business loan industry. Traditional loan providers often don’t consider financing them.
But, technology has made it easy for minorities and disadvantaged people to access loans. They can easily connect online with loan providers and get access to loans. Consequently, it won’t be wrong to say that technology has opened new doors for them to gain financing, making them successful entrepreneurs.
5. Better accountability
Earlier, the small business loan industry was often considered risky and sometimes looked suspicious. A prime reason was the need for more information by organizations with loans. But now, small business owners have better access to information about loan providers.
Some online platforms even give the option to choose between providers by comparing their ratings and reviews. So, small business owners can easily find out about an excellent legal provider for better accountability.
6. Greater Transparency
Some years ago, when the loan applications of small businesses were rejected, they had no information about it. They did not know the basis for the rejection of their loan application.
The process of loan applications was dealt with by humans and gave few insights to small business owners. But, technology has improved transparency. Technology now manages the loan application process and gives valid reasons to SMB owners why their loans were rejected. So they can work on it the next time they apply.
These are some of the significant benefits of technology in improving access to loans for SMBs.
Summing up
Technology’s role in improving small business owners’ access to loans will undoubtedly help their growth. It improves data sharing, loan personalization, transparency, and accountability and helps to serve different sections of society. Overall it will benefit society by increasing employment opportunities and contributing to the development of marginalized sections of society.
Industry leaders believe that besides revolutionizing small businesses’ production, innovation, and operations, better access to loans can be a Game changer. It plays a vital role in developing the entrepreneur and start-up ecosystem in countries for economic development.