The Changing Landscape of Alternative Lending Online


It is now a widely accepted fact that traditional banks are downsizing their loan books and lessening their lending portfolios in a bid to minimize their exposure to small enterprises. This trend kicked in after the credit crisis that was experienced in the year 2008. However, it may not be all gloom and doom for enterprises. The onset of financial technology and the ascent of agile loaning players have opened up a suite of innovative products in the alternative finance  sectors.

Here are a few examples of the latest advancements that feature prominently in global trade and finance. The developments usher in diverse innovations in equity funding and  debt.

A shift from offline to online  lending

Just recently, getting business funding would be done through a nearby bank branch or a corporate lender/agent. This is still more often the case, in spite of the fact that money lenders are now turning out to be visibly noticeable on the internet. They have provided a lot of information to assist those borrowing the money to improve their cash flow and how to use the debt finance. Additionally, online referrers are, at the moment, a new form of business partnership for money  lenders.

However, given the enormous rivalry on the internet, being seen is essential. Tim Berners-Lee, the innovator of the World Wide Web affirmed that the web had surpassed 1 billion sites by September 2014. Therefore, resources and an online appearance have been classified as a priority by some loan lenders, to compliment and boost the work of manual  referrers.

Automation of Funding  Applications

These days, “people” have little say in the approval of an individual financing. For example, applying for a car financing loan today can be carried out automatically. Credit confirmation of business applications is also moving in that direction. The sector has seen a lot of integrations on pre-qualify enterprises and credit check thus enhancing automatic financing. This trend has seen the diminishing of the traditionally 6-8 week loan application procedure to only a couple of  hours.

Blockchain could transform  lending

Some elements of the worldwide supply chain network are being interfered with by the utilization of blockchain technology. Structured business finance and supply is the financing of merchandise that permits an enterprise to extend payment periods to suppliers. Additionally, it permits SMEs to get paid in advance to avert problems associated with cash  flow.

Blockchain technology is utilizing the fascinating innovations in the escrow space to help buyers and business owners to interact without a middle man coming in between. One practical example of the transformation is evident in the utilization of a blockchain API and QR codes to enable business enterprises to track their products safely, even as they exchange hands throughout the supply  chain.

For instance, we could begin to see the financing of merchandise between a buyer and seller approved through blockchain technology, meaning there would be no reason of involving banks. The whole transaction procedure is monitored from the production site of the goods to the buyer’s  store.

Big Data and the Power of the  Crowd

Big data is a noteworthy driver of the web-based lending space. Be it behavioral and psychometric assessments, or cross-referencing of an individual’s social media account activities, big data can help money lenders relate these outcomes with the borrower’s probability of defaulting or his/her financial  conduct.

The present moment appears to be an appropriate time for the ascent of alternative crowdfunding sites. With banks under the pressure of the regulator to lessen their credit book loan to 10:1 up from 40:1, there has been little development and decreased loaning from banks. This provides an opportunity to small-scale lenders to  rise.

Statistics indicate that banks are not moving fast enough to keep up with the evolving industry. Instead, they appear to be less inclined to loan to small and medium enterprises, which is the reason alternative lending is gaining popularity. The business has developed into a multi-faceted sector that combines ancient products, such as equipment renting, and new money only items, such as working capital, daily payment loans, and merchant  cash.

Crowdfunding is the channeling of money into one account by a group of business people (or general society) to invest in a certain business field or company. A practical example of crowdfunding is Crowdcube, a value crowdfunding platform that is helping individuals to build investment portfolios online. According to financial reports released by Crowdcube for the year 2015, the company managed to raise an impressive £6m in the month of  July.

Crowdfunding was generally an unknown venture 3 years ago. At the moment, however, the venture is on the radar of many Venture Capital funds. An increase in tech companies coupled with many customers has resulted in a noteworthy increment of crowdfunded equity investment ventures in the past couple of years. Indeed, it is evident that big data coupled with the power of the crowd is rapidly changing the alternative finance  sector.

In conclusion, alternative finance as a sector is changing the way business enterprises can get access to title loans and pay their equity or debts. It has also brought competition in the finance market, which is a good thing for business people and the growth of their business enterprises. Access to loans has been made easier and faster than ever before. Efficient tracking of goods can be also undertaken thanks to the existing online  platforms.

All opinions expressed on USDR are those of the author and not necessarily those of US Daily Review.