Business lending has come a long way, with better tools for both banks and consumers and better, more optimized processes for everyone involved. It’s easy to find a loan that suits your business’s needs, it’s easy to compare offers, and it’s even easy to apply and receive funding.
But what does the future of business lending hold?
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Better, More Streamlined Platforms for Applicants
Most loan originators understandably make applicants their top priority. When applicants have good first impressions, excellent overall experiences, and a solid relationship with a brand, they’re likely to buy products from you and recommend that brand in the future.
Already, millions of banks and financial institutions have invested significant time, money, and effort into building better, more streamlined platforms for applicants. In a matter of minutes, you can apply for a business loan online and potentially see interest rates and terms of other competitors as well.
In the future, this process is going to become even better designed and more streamlined. You may only be required to fill out a handful of fields, and in mere minutes, you can find out whether or not you qualify for a particular business loan product.
Faster Processing and Approval
Similarly, financial institutions benefit from faster processing and approval – as do business borrowers. This comes with a host of individual advantages, such as less manual effort required, more loans processed in less time, and faster acquisition of funding that business owners can use to advance their businesses.
The downside of this is that historically, faster processing and approval has been affiliated with less due diligence. Rushing your decisions and ignoring critical pieces of information can be risky. But with better tools and technologies, we can mitigate this disadvantage and process loans faster with minimal risk.
Data Analytics and Personalized Offers
Thanks to big data, banks understand their customers better than ever before. Demographic insights, historical purchases, and critical financial data can be processed and understood so that banks can create totally personalized offers for their customers. Instead of choosing one of three different loan products, borrowers can get a loan product that is perfectly suited for their needs and their business.
Again, this is mutually advantageous. Borrowers get a better aligned product and financial institutions get to close more deals.
The Blockchain
You might be familiar with the blockchain because of its relationship to cryptocurrencies. Essentially, the blockchain serves as a distributed, decentralized ledger that can process and validate transactions between parties. With respect to cryptocurrency, the blockchain is used to keep track of crypto ownership and validate crypto exchanges.
The technology is praised for its security, privacy, and overall efficiency, ultimately reducing the cost of many types of transactions. Because of this, banks and financial institutions are looking to incorporate the blockchain into more areas, including lending. The end result could be a more secure, more straightforward lending process for borrowers.
DeFi
Decentralized finance (DeFi) is a conceptual framework for the future of finance where centralized institutions are no longer relevant. Instead of depending on central banks, established major financial players, and other influential organizations, more parties can freely exchange with one another. With the far-reaching influence of modern institutions, this is likely a distant dream – but one that could have powerful and positive implications.
Higher Transparency
Transparency is arguably the best way to build trust, and banks are beginning to realize this. To build trust with their customers and reinforce positive perceptions of their brands, banks are making a concentrated effort to increase transparency. They proactively explain their applications, financial products, and processing to customers and aren’t afraid to compare themselves to the competition. As competitive pressure mounts, transparency is going to become a practical requirement for all major players in the field.
Inclusive Lending
Many banks have recently attempted to practice more inclusive lending. Historically, ethnic and racial minorities (as well as women) have had difficulty securing funding for their businesses, not just because of direct discrimination, but also because of a wide variety of secondary factors. Banks benefit from having more customers, and business owners benefit from having more funding, so it only makes sense for banks to practice more outreach and dedicated targeting to reach historically marginalized groups.
Higher Regulatory Standards
It’s also worth mentioning that higher regulatory standards throughout the world are putting more pressure on financial institutions. There are more rules and restrictions for how business lending can be made available, complicating certain processes and raising costs.
The future of business lending is promising for business owners and banks alike. With better technology, smarter practices, and more streamlined experiences, more business owners can get the funding they need and financial institutions can capitalize on more plentiful opportunities.
