We are calling it. Small businesses are the backbone of the economy. However, these small businesses do not get the same funding as their big corporate counterparts. However, over time, the financial landscape has also changed.
2024 has brought on a lot of changes in the financial world. Of which small businesses have also been able to access some capital. With multiple government innovations and fintech revolutions, 2024 has been exciting for small businesses. Small business lending has seen a trend rooted in a technology-driven future.
1. Fintech is taking over
Earlier businesses had only traditional banks to go to for their funding. However, with fintech taking over, small businesses have alternative lending options. These alternate lending solutions make the process quick, easy, and flexible. These fintech companies also help small businesses by being accountable. The small business owners can compare offers from different companies. Which makes most new entrepreneurs turn to fintech companies for easy access to capital. This holds a small business lender accountable for the services they provide.
Many online platforms like Kabbage and Fundera have revolutionized small business lending. These platforms offer faster approvals with minimal documentation! These platforms use alternative data to assess whether a business is worthy of credit. This makes funding accessible even to businesses that may not qualify due to old-school restrictions.
2. Alternative lenders are stepping up
Traditional banks are still a reliable source of funding. But alternative lenders are the latest trend. These small business lenders are filling the gap that traditional banks cannot fill. When regular banks impose stringent processes, alternative lenders swoop in to cater to those who do not meet these standards. But what really sets them apart is their risk capacity. Small business lenders provide flexible finance solutions. This is why, in 2024, more small business owners will opt for alternative lenders.
Peer-to-peer platforms, private equity firms, and venture capitalists are some examples of alternative small business lenders. They cater especially to small businesses. They do so by providing specific needs such as merchant cash advances or invoice financing. This is perfect for those businesses with fluctuating incomes.
3. Government funding initiatives are on the rise
Small businesses are extremely important in the country’s economy and most governments across the world are recognizing this. This is the reason why there has been a rise in government funding programs. The reason for this is to create more entrepreneurs and boost the economy.
These programs are good for small business owners because they are an easy way to get funded without worrying about the high rates of interest that private lenders may have. Such initiatives show that governments want to create an environment that will help entrepreneurs thrive.
A growing trend that the US has seen is the Small Business Administration’s (SBA) loans. 2024 has seen a growing interest in SBA loans. Governments are also rolling out other grants and low-interest loans to help small businesses. This would help them recover from all the challenges they faced in the industry post pandemic era.
4. Online small business lending is the new normal
The pandemic changed how we shop. Most businesses went online, especially small businesses. And small business lending was no exception. Online small business lending has made its place in the year 2024 as the new normal. Accessibility is unlike any traditional lending methods. One did not even have to meet in person to get approvals. This streamlined process is ideal for new-age entrepreneurs living a fast-paced life.
Various platforms like OnDeck and BlueVine have also made online small business lending their expertise. These platforms make it really easy for small business owners to apply for loans at their own convenience.
5. Data-driven lending is changing the game
The use of data surely is making waves in the year 2024. In the middle of every industry is data. Small business lenders heavily use data to decide whether or not the lending is favorable for them. The traditional credit score is not the only parameter for lending in 2024. What this means is that new business owners will have more opportunities to get funding even if their credit score isn’t strong enough.
There could be various parameters that can help you decide if you are eligible or not. These parameters could be your cash flow, your social media presence, and even your customer reviews. This improved way of lending allows small business loan lenders to understand better if a business is worth investing in or not.
6. Sustainability and social impact are key factors
Almost everybody, even businesses, is focusing on environmental and social issues; because of this, small business lenders are also focusing more on projects that are environmentally conscious and have a social impact. The point is that many lenders are even prioritizing businesses that are eco-friendly or giving back to society when it comes to funding. They even have specialized loans for such businesses.
It is safe to say that this is a trend that is on the rise. Products such as green loans and social impact financing will find those businesses that align with these values. This trend has been accepted widely by younger entrepreneurs who wish to make a difference in their businesses.
7. Personalized lending experiences
With every technological development, we are getting more and more defined solutions. Then why should lending be any different? In 2024 we will not accept a one-size-fits-all diskette. Each business would want customization. Hence, small business lenders are also focused on providing personalized funding solutions.
Lenders are using artificial intelligence (AI) and machine learning to customize their products. Lenders feed the data points and analyze a business’s unique needs. This helps them customize the kind of loan to offer them. Using AI, small business lenders can offer short-term loans for a seasonal business or a large loan for expansion, and so on.
8. Rising interest rates are driving demand for alternatives
When it comes to small business lending, traditional banks often have high interest rate. This is mainly because of how young the business is. So, with interest rate on the rise, small business owners are looking for alternatives. They are opting for alternative funding, which would bring them investments on favorable terms.
This trend has boosted various alternative funding solutions. There are many other options now, such as crowdfunding, revenue-based financing, community lending programs, and so on. Such options are not only low in interest, but they also give a feeling of community.
Conclusion
With each year we see changing trends. And the small business lending trends are changing as well. With fintech advancements, alternative lending solutions, and government initiatives taking the lead, there is more scope for funding for budding entrepreneurs.
2024 has seen a lot of trends too. Primarily the shift towards data driven lending is something we have to keep an eye out for. Because this has made small business lending not only faster, but much more innovative and accessible.
They should take advantage of all the innovative solutions available to them and make the right choice by finding the right small business lender to support their entrepreneurial journey.
