The pandemic hit businesses hard in 2020. CNBC reports that 60% of the businesses that closed their doors because of the pandemic are now permanent. For those still in the race, alternative lending solutions have provided opportunities for businesses to borrow money, restructure and pivot successfully. So, how exactly have online loans shaped the business world, and how are companies continuing to pay these loans during an economic crisis? Through digital lending.
How the Pandemic Impacted Business Borrowing Trends
Small business owners often have strong aversions to borrowing money. This may stem from unpleasant experiences with traditional lenders or owners’ personal experiences with debt. Many business owners also often pass up business grants and other government-subsidized benefits they might be eligible for because of all the paperwork. The disaster relief loans created as an economic pandemic response drastically changed these behaviors.
Capital Infusion Became Necessary
Even risk-averse business owners applied for their shares of EIDL grants and PPP loans. Unfortunately, the response was overwhelming, and larger businesses emptied the coffers before small businesses could get their fair shares. So, while business owners got the experience of applying, most did not get the financial support required.
Business Owners Found Ways To Fill the Gap
To address the government’s inadequate support, many business owners took that new experience to apply for online lending options. Digital lending providers were also eager to help fill the gap and offer several alternative lending solutions to businesses in need, even as traditional lenders tightened lending restrictions.
Business Owners Found Opportunities To Regroup
Government support, digital lending solutions, and loan refinancing bought business owners the time they needed to go back to the drawing board, restructure their finances and make a successful pivot. Because of this, they were able to keep up with payments, even as sales continued to decline and the economy contracted.
New Businesses Emerged
An interesting phenomenon to come out of the pandemic is that while so many businesses shut their doors, new ones sprang up. A significant number of these businesses were created by people who lost their jobs and had to create a new source of income. Others saw opportunities unique to the pandemic and wanted to cash in before the end. Forbes predicts that these new businesses will need more funding as time progresses.
What the Post-Pandemic Future of Business Lending Looks Like
Despite the start of a new year, the 2020 trajectory continues. Coronavirus cases continue to soar even as millions of Americans receive the COVID-19 vaccine. This can make it difficult to determine how 2021 will progress, even in the finance world. Still, we can make a few reliable projections.
Business Owners Feel Less Intimidated by External Funding
Business owners will not forget their financial allies in the years ahead. Many entrepreneurs now have the experience of applying for government grants and loans during a very confusing and challenging time. This improves the likelihood of businesses continuing the online borrowing trend.
Alternative Lending Will Continue To Grow
The micro-loan business may also grow well in the post-pandemic world. What counts as a small loan may vary between industries and businesses, but smaller loans to fill funding gaps are now more common in the business finance world. These and other digital loan options significantly benefit businesses that traditional lenders determine to be too risky.
Newer Small Businesses Will Feed the Digital Lending Growth
As time progresses, advances in fintech will continue to make digital loans an industry leader. Business owners, like their customers, much prefer to do business online. This will compel traditional banks to compete in the new online space, though how well they achieve this remains to be seen. Digital lending will also benefit from easy access to data, creating more unique ways to determine borrower eligibility.
How To Choose an Alternative Loan Option
If you are still on the fence about the role online lending can play in your business, there’s nothing wrong with being cautious.
As time progresses, some online lenders will emerge as leaders ahead of others. This will make it easier for you to determine whom to borrow from. In the meantime, complete a thorough research of lenders before applying for a loan and putting in your personal information:
- Does the company have good reviews?
- Do you personally know anyone who has worked with it?
- How well does its team make itself available to answer your most pressing questions?
- Are the responses professional and timely?
If you want an alternative lending solution that ticks these boxes and more, consider LQD Business Finance. Think of us as not just your future business loan provider but your current business ally. Find your custom financing solution with us today.