Some Advantages Of Taking A Business Loan From Fintech Lenders

Some Advantages Of Taking A Business Loan From Fintech Lenders

Fintech technology implies the use of innovation and technology for providing financial products, as well as, services. We know the Fintech lending is an integral component of this field.  As per https://blog.gao.gov, Fintech Lenders are supposed to be nonbank organizations that operate online. They may be using alternative data including utility payments and rental property to assist in determining the creditworthiness. Even though utilizing alternative data could be making loans available to far more people, you may enjoy many benefits of Fintech but there could be a few potential risks as well.

Fintech lenders are supposed to be a parallel form of business financing. Fintech lenders are entities who are involved in activities related to finance but the manner of functioning is quite different from the conventional lenders. These organizations are very much fueled by technology and they are referred to as the progressive and path-breaking vision of the banking sector. We understand that Fintech organizations easily offer business loans for both MSMEs and SMEs and they could, therefore, be used as bank loan alternatives.

The process of evaluating the loan eligibility in case of a Fintech organization is supposed to be quite different from the conventional banks. The conventional banks would be examining the loan application, the business’s age, credit score, the business’s net worth, business plan, the revenue, or even the collateral value you wish to upfront to determine if the business is eligible or qualified for the traditional bank loan. However, in case of a business loan from a Fintech company, they do not consider all the conventional parameters as the sole way of gauging the creditworthiness of any candidate for a business loan. Fintechs treat every applicant individually and there are no fixed set of criteria for eligibility. As such more and more businesses are having easy access to business loans today from Fintechs.

Some Potential Risks Of Fintech

The potential risks of utilizing Fintech data would be including certain kinds of alternative data like online social media network information relating to living in certain disadvantaged areas, could be related to characteristics that are safeguarded by specific fair lending laws, for instance, laws that are known to prohibit discrimination on primarily the grounds of national origin, and race. Consequently, utilizing alternative data in certain credit decisions would be raising concerns that borrowers or loan applicants who seem to be part of some of these protected categories of people may be impacted adversely.

There are concerns like there could be no transparency relating to what alternative data actually is being utilized and precisely how it is going to be implemented in the ultimate credit decision. In this context, the borrower may not be in a position to dispute the used information. Recent breaches in Cybersecurity reveal that there could be potential security risks. This may gradually become a major issue as lenders keep expanding beyond the use of conventional borrower data.

Even though there could be specific potential risks associated with utilizing alternative data, you need to realize that there are certain potential benefits too. For instance, Fintech lenders could be offering loans to candidates whose conventional credit history is not good enough for getting loan approval.

Fintech lenders are far more efficient and quick in arriving at credit decisions as compared to conventional banks. They help in boosting borrower’s convenience. Moreover, Fintech lenders could consider using alternative data for verifying identities of borrowers that help in preventing fraud. We understand that Fintech loans come with numerous other benefits that make them a far better option as compared to traditional bank loans.

Minimal Paperwork

When you are putting in a business loan application from a conventional lender, it is essential to submit many documents and involves substantial paperwork. Fintech companies seem to be operating differently. They do not believe in demanding the submission of any physical documents. You simply require uploading the soft copies of all the necessary documents for supporting your business loan application. Thanks to technology, today you may apply for business loans online and get loan approval almost instantly from reputed lending organizations such as https://libertylending.com/ and the process does not involve any complicated documentation. Simply upload soft copies of important documents.

Much Better Turnaround Times

Traditional bank loans can take a month or two to be processed. Some businesses really cannot afford to wait that long and they shouldn’t have to in the 21st century. This is where the “new age businesses” come in, and they handle most of the financing-related procedures online which makes it expedient and hassle-free.

Zero Hidden Charges

Fintech business loans come with next to no fine print. They have very clear and transparent processing, devoid of hidden charges and other contingency fees. This is a refreshing change from the likes that you will encounter when going the traditional route with banks or other lending institutions. You won’t be forced to get special insurance schemes or any other products that might need you to shell out more money that ends up lining the pockets of the fat cats on the other side of the table.

Completely Online

Fintech firms that offer business loans follow a fully online pipeline for processing. The loan seeker can apply for and get access to a line of credit without ever having to visit the offices or submitting any physical documents. This fits very well into busy schedules for businessmen while also ensuring the level of transparency and speed that every process should have in this day and age.

Get Collateral Free Loan

The most striking feature of a Fintech business loan is that it comes without any security or collateral. However, if you wish to seek a business loan from a conventional bank or other financial institution, it is mandatory for you to provide security for your business loan. Moreover, the loan amount approved would be dependent on the worth of your asset offered as security. However, a Fintech business loan online is supposed to be quite different. You would be free from locking up any property or asset as collateral.

No Prepayment Penalty

We know that today, practically all types of credit would be attracting some sort of a prepayment penalty or charges. A prepayment penalty is calculated as a specific percentage of the outstanding loan amount. You would have to pay this amount as a penalty for repaying your loan before the loan term is over. However, the new era technology-based Fintech lending organizations do not believe in levying such penalties. If you could repay your loan well ahead of the agreed time, you could do that without any additional charges or prepayment penalties.

Conclusion

The Fintech organizations are acting as the lifeline of numerous SMEs. This primarily algorithm-based lending system plays a pivotal role in offering financial support to startups and small businesses and has been assisting them in growing and sustaining in today’s competitive business world.