Thanks to financial technology (fintech), the world of finance is in turmoil, and one of the major battlefields is lending. Traditional financial institutions, alternative lenders and credit unions are all fighting for a bigger share of the market.
And the winner is…small businesses.
Small businesses that used to be ignored and swept aside by large financial institutions are the winners of the lending competition
Yes, you’ve read that right: small businesses that used to be ignored and swept aside by large financial institutions are the winners of the lending competition.
What Is the Lending Competition?
With the emergence of fintech and alternative financial institutions like BlueVine, big banks faced competition in a way that was previously unheard of.
Traditional banks used to have monopoly over the the financial landscape. Lending, payments, savings, and all other financial services belonged to banks and banks alone.
This meant that they could choose who to do business with, and small businesses had to live with the consequences. Because banks wrongfully perceive lending to small businesses as risky, SMB owners had to brace themselves for declined loan applications as well as expensive and slow payments.
Alternative financial companies realized the large untapped potential of small business lending
But fintech changed all that. Alternative financial companies realized the large untapped potential of small business lending. For example, BlueVine offers a line of credit for up to $200k, as well as invoice factoring (meaning you get an advance on your outstanding invoices).
And since fintech cuts meaningless red tape, you can get your loan decision within one business day.
No wonder big banks took notice. Now, they want in on the lucrative market of small business lending, and thus the competition began.
The Battlefield Right Now
If you’re picturing a battle between two knights in shining armor, fighting for the hand of the princess in marriage, you’re not entirely wrong. Although the fight is less bloody, it’s just as fierce, and the stakes are high.
And the best thing is: your small business is the princess.
According to a recent study conducted by Biz2Credit, big banks approved 30% of small business loan requests in May of 2018. This means a roughly 10% increase from last year, and the number is up from a low of 8.9% in 2011.
Alternative lenders approved 56.4% of loan requests in May (just like in previous months), while credit unions gave green light to 40.1% (which is slightly down from 40.2% in April)
If we look at traditional small banks, the number is even higher: 49% of small business loan requests got approved last month. No wonder small business optimism is soaring: it reached 107.8 in May, which is just 0.2% shy of the all-time-record of 108, measured in July 1983.
In comparison, alternative lenders approved 56.4% of loan requests in May (just like in previous months), while credit unions gave green light to 40.1% (which is slightly down from 40.2% in April).
Small Businesses Win No Matter What
All you need to do is sit back and watch the battle unfold. Enjoy the increasing number of loan offers landing in your inbox, and start planning what to do with your business loan.
Regardless of which loan provider you go with, remember that you have a choice in other banking services as well, thanks to fintech.
Global payments are the best example of that. With Veem, you can forget late transfers, high foreign exchange rates, and expensive wire fees.
Veem allows you to send and receive international payments with just a click. You can track all your transactions in real time and enjoy personalized services with competitive foreign exchange rates.