Since the Great Recession of 2008, a variety of small business funding and alternative finance options have come into play. The constantly evolving financial landscape can be difficult to understand and can make it challenging for small business owners to choose the best financing option for their business. So what’s in store for small business funding in 2018?
Banks Loans
While they are nowhere near the level they were at before the recession, big banks are getting back in the game of small business funding. Throughout the past year, the Federal Reserve has continuously raised interest rates. This has made small business lending more profitable for these institutions, resulting in an increase in approval ratings. According to analysis by  Biz2Credit on small business loan approval rates, big banks are approving 25% of these loan requests.
Fintech Utilization
It has become impossible for the banking industry to ignore the fact that their operating systems are antiquated. Fintech is the driving force behind many alternative finance and online lending companies. Some institutions are investing in building their own digital platforms and others are looking to partner with existing fintech companies. In many cases, these partnerships can be more cost-effective. They will also enable traditional institutions to utilize fintech and update their processes quicker. 2018 will surely see more of these partnerships being formed.
Digital Engagement
Forrester, one of the most influential research and advisory firms in the world, predicts that in 2018, most organizations will not see half of their customers, members, or clients. Consumers will move away from traditional banking practices to digital financial transactions. The digital shift is already extremely evident in many areas of our lives such as online shopping, educational opportunities, and more. Biz2Credit reports that 60 percent of their new applications are filled out on mobile devices, many of them at night or on weekends – well outside “traditional banker’s hours.”
The Future of Alternative Finance
With traditional banking institutions starting to get on board and build partnerships with fintech companies, what does this mean for the future of alternative finance? Some predict 2018 will be the beginning of its decline while others view it as simply a natural part of its evolution.
Considering the previously mentioned statistic, with only 1 in 4 small business loan applications approved by traditional institutions, there is still a large segment of small businesses seeking financing. In many cases, alternative finance companies can provide exactly what they need – a streamlined application process and timely funding, even with less than perfect credit. Credit history is not the sole deciding factor with alternative financing. With the help of fintech, a determination is made based on the revenue generated by the business as well as its plan and potential for growth.
Alternative finance also offers multiple financing options, allowing a business owner the opportunity to obtain funding suited to their specific needs, with repayment options that fit their budget. It effectively fills the gap in small business funding. Rather than the demise of alternative finance, it is more likely that 2018 will see newly forged partnerships between traditional financial institutions and alternative finance companies. These partnerships will offer consumers superior banking services including fast, effective small business funding.
At CFG Merchant Solutions, we understand having to secure financing always makes business owners a little nervous. It’s important to choose the right alternative lending option for your small business.
We offer a variety of funding options for small businesses. We will guide you in choosing the perfect solution for your individual business needs. Our team brings to the table more than 60 years of institutional investment banking experience in the credit, commercial finance, and capital markets.
We are a privately owned and operated specialty finance and alternative funding platform. We focus on providing capital access to small and mid-sized businesses (Merchants) in the U.S. that have historically been underserved by traditional financial institutions and may have experienced challenges obtaining timely financing. Contact us or apply online today!