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.

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.

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.

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.

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.

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.

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.

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.

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.