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Small Business Lending 2.0: The Technological Revolution

By: David Goldin


It’s amazing how far technology has come across all mediums. For centuries, advancement in technology increased at a slow rate until the 20th century, when innovation began happening at an exponential rate. Now that we’re in the second decade of the 21st century, technology is showing no signs of slowing down. Specifically, the internet and mobile have become the torchbearers of this technological revolution we’re finding ourselves in, and while it may not seem like it, small business lending is right in the middle.

When new technology sprouts up, there is often a battle between two entities: old guard vs. new. Normally, the old guard will hold on to its original ways as long as possible until it has no choice but to adapt. You can look at this from a variety of examples, from cell phones to computers to digital music and more. Currently, more and more things are becoming digitized. Web security is the most reliable and sophisticated it has ever been, and more companies doing away with paper to adapt to digital.
But what does this have to do with small business lending?
That’s easy. Before, when you a business owner wanted a loan, he or she went to a bank or lending institution and picked up an application and wrote it out by hand with a pen. Amazingly, this is still true! Most banks and traditional lenders still only allow paper applications because they are reliable and they want to avoid things like fraud and security breaches. Banks deem it to be unwise to simply give money over the internet to a business they have never met or seen. But doing things this way is almost becoming extinct, because alternative lenders have embraced technology and are using to leap ahead of their competition.
Business lending 2.0
Alternative lenders have two distinct advantages over traditional lending companies: quickness of receiving funds and simplicity of applications. Many alternative lenders offer online and mobile applications. These are not just inquiries: these are valid loan agreements. Upon filling out an online application, owners can be approved in hours and have the money in their account in just days. Fast funding and online and mobile applications are a crucial aspect to the alternative lending business model. There’s a reason why alternative lenders approved over two-thirds of their applicants in 2013.
The future
It’s difficult to say what the future has in store for online business loan applications. Inevitably, it is only a matter of time until banks and others begin embracing technology for their loan programs. In general, loans of all types are a major source of revenue for banks, and they cannot allow themselves to be leapfrogged by smaller, boutique lenders.
It will be interesting to see how banks adapt to the technology available.
This article was originally published by AmeriMerchant
Published: February 11, 2014

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David Goldin

David Goldin is the President & CEO of AmeriMerchant, a leading provider of working capital solutions for businesses including merchant cash advances and business loans.  Founded in 2002, AmeriMerchant has over 120 employees and is headquartered in New York City. David's previous experience includes co-founding an Internet development company and building it from four to fifty people that was eventually sold to a multi-billion dollar publicly traded telecommunications company.  David is also a founding member and President of the North American Merchant Advance Association (NAMAA), a 501c trade association for the merchant cash advance industry.

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