The close of 2020 marked the end of a challenging year that brought both change and innovation to the way businesses meet their financing needs. Companies that are determined to grow despite the pandemic’s challenges are moving ahead with the help of innovative cash acquisition and growth tools now available through financial technology. Also referred to as FinTech, this sector of the financial services field removes previous barriers to funding, provides more customized options, and streamlines the application process.
New and transformative digital technology enhancements have shaped a paradigm shift in the way businesses can obtain specialized solutions to inventory financing, equipment acquisition, and a wide range of other funding needs. The ability to create unique ways to process and deliver business capital through technology points to a resurgence in growth for companies planning on rebounding from the uncertainties of 2020.
How is the FinTech Sector Helping?
Several FinTech trends that began disrupting the conventional methods of raising capital during the past several years may have been overshadowed by the pressing concerns brought on by COVID-19. As a response to the uncertainty of a pandemic economy, central banks began flooding the global markets with excess liquidity and lowered interest rates until they sunk to record-breaking levels. Many businesses, however, found themselves left out or unable to qualify for the cash assistance that Congress made available to provide pandemic relief.
The growing FinTech sector made headways by streamlining digital lending functions and processing loans online or through mobile apps. The demand for easy online applications accelerated during the COVID-19 crisis when the U.S. government announced it would guarantee $350 billion worth of small business loans as part of its pandemic relief effort.
After Congress unanimously passed the $2.2 trillion CARES Act in March of 2020, numerous loan applications submitted to traditional banks were rejected, reportedly because of the lack of an established lending relationship. Too many businesses suddenly found themselves, at first, unable to obtain the financial assistance promised by the government. Signing up with FinTech service providers resulted in underserved businesses acquiring the means to obtain capital through new funding sources.
The FinTech Sector Offers More Reasonable Lending Options
Small businesses that needed to find alternative funding solutions found that several FinTech lending platforms came through for them with loan approvals and needed cash. The new financial sector enabled businesses to make advantageous and problem-solving connections through peer-to-peer lending platforms. Loans offered through FinTech firms process faster, and once approved, the funds can be transferred to a business owner’s account electronically. Quicker access to capital means inventory or supplies can be ordered, and goods and services can reach customers sooner.
How is FinTech Changing how Businesses Adjust to Pandemic-Related Issues?
Digital financing provided the processing speed and flexibility required to effectively respond to the immediate needs of companies forced to deal with unique and unforeseen circumstances. Due to the COVID-19 pandemic, many businesses were pressed to explore alternative means of contactless operation quickly. Restaurant chains, for example, needed to install new systems to automate drive-thru ordering processes. FinTech enabled businesses to find specialized funding solutions, unique to their specific needs. Digital financing is also, by its nature, a contactless process well-suited to COVID-19 precautionary measures.
Are Other Lenders Embracing the Digital Transformation?
To keep up with their FinTech lending competitors, traditional banks have invested in their own technological improvements. AI may be used to provide customer service functions such as automated chatbots. Lending software may also be programmed to offer customized loans and perform the required due diligence. Although traditional brick-and-mortar banks may promote these tools as service enhancements, they are not representative of the unique advantages found in digital financing. Traditional finance institutions come with regulatory restrictions that stand in the way of providing the full range of options that a single FinTech lender can offer.
LQD Business Finance makes innovative use of the new technology to provide comprehensive and customized solutions that traditional lenders cannot offer. Efficient loan underwriting and a wide range of funding options eliminate the need for businesses to apply to different lenders. Flexible loans can be designed to meet a broad spectrum of funding needs, and with much of the time-consuming processing eliminated. Regardless of how unique and specialized the market may be, LQD Business Finance can provide funding when businesses need to move quickly. Proprietary and streamlined technology enables up to $10 million to be disbursed in 30 days or less.