The traditional lending models have existed for centuries, but with the advent of technology and data analysis, new alternatives for enterprise and SME lending have emerged. These new models are more efficient and flexible and offer quick access to funds for businesses. With the rapid pace of technological advancement, companies and SMEs must take advantage of the new options available to them to manage their finances more effectively and to stay ahead of the competition.
Moreover, managing expenses has become crucial for businesses to remain profitable and sustainable. With new lending options, companies can better manage their costs and optimize their cash flow. The innovative lending models provide quick access to funds and offer easy repayment options and transparent pricing, which helps businesses make informed decisions.
How to finance your SME Business without a traditional bank loan?
Small business owners who need alternative financing options to traditional bank loans can consider several options. One such option is to approach venture capitalists who provide funding, networking, and professional guidance to launch your business quickly. Another option is to look for angel investors willing to invest in start-ups and typically do not ask for company shares or claim to be stakeholders in your business. Businesses focused on science, or research may also receive grants from the government.
Businesses can also consider alternative lending options like peer-to-peer lending, crowdfunding, or merchant cash advance. This blog is a reference for small business owners who need information on financing options other than a traditional bank loan.
Why bank loans are difficult to obtain for SME businesses?
Capital is difficult for small businesses to access for several reasons. Banks are okay with lending to small businesses, but their traditional lending process needs to be updated and labor-intensive, making it difficult for small businesses to get approved. Unfavorable regulations for local shops and small organizations exacerbate this.
Banks typically want to see a healthy five-year business profile before extending an offer, which is challenging for many new small businesses. As a result, small business owners often need more financing options. This blog is a reference for small business owners facing difficulties obtaining bank loans and looking for alternative financing options.
What is Alternative source of financing?
Alternative financing is any financing method for a business outside traditional banks. This type of financing has gained popularity in recent years due to the ease of access and convenience it provides to companies. Alternative financing can be based entirely online, making it accessible to a broader range of businesses regardless of their location. The most common alternative financing options include crowdfunding, online loan providers, merchant cash advances, peer-to-peer lending, and cryptocurrency.
Crowdfunding, for example, is a method of raising funds by soliciting contributions from many people, typically through an online platform. Online loan providers offer loans to businesses through a streamlined, automated process, making it easier for companies to access funds quickly. Merchant cash advances provide businesses with an advance on their future sales, while peer-to-peer lending allows individuals to invest directly in businesses. A cryptocurrency is a digital form of currency, and It uses to facilitate transactions, including business financing.
Alternative financing options offer several benefits over traditional bank loans. They are often faster, more flexible, and require less paperwork. They also provide businesses with access to a broader range of financing options and can be more accessible for companies that may not meet the strict requirements of traditional banks. Overall, alternative financing has become an increasingly popular option for businesses seeking capital and provides a much-needed alternative to conventional bank loans.
Traditional bank loans vs. other alternative lending options for SMEs
Alternative lending options for SMEs refer to any form of financing that is not a traditional bank loan. These options have grown in popularity recently as small businesses have sought new ways to access funding. Some of the SMEs’ most common alternative lending options include online lending platforms, peer-to-peer lending, crowdfunding, merchant cash advances, and factoring.
Online lending platforms connect borrowers with a network of individual and institutional investors who provide funding. Applications can be completed online and receive funding in a few days. Peer-to-peer lending allows businesses to borrow money directly from individual investors rather than banks. Crowdfunding will enable firms to raise funds by appealing to many people, typically via the internet. Merchant cash advances provide a lump sum of cash to a business in exchange for a percentage of future credit card sales. Factoring involves selling outstanding invoices to a factoring company for a discounted rate to receive cash quickly.
These alternative lending options differ from traditional bank loans in several ways. They tend to have faster application and approval processes, with some possibilities of providing funding in as little as a few days. They also tend to have more flexible repayment terms and may be more accessible to businesses that may not meet the strict requirements of traditional banks. However, it is essential to note that alternative lending options may come with higher interest rates and fees than conventional bank loans. Small business owners should carefully consider the pros and cons of each option before choosing the best financing solution for their business.
What are the Benefits of Borrowing funds from Online Lending Platform?
Speed: One of the most significant advantages of online lending platforms is their speed. They have streamlined the application and approval processes, meaning that you can receive funding in as few days, compared to the weeks or even months it can take to secure a loan from a traditional bank.
Flexibility: Online lending platforms offer a wide range of loan terms and repayment options, allowing businesses to choose the best option for their needs. This flexibility can be especially beneficial for start-ups or small businesses with a short credit history or established financials.
Creditworthiness: Alternative lenders may be more willing to work with businesses with less-than-perfect credit, as they often use different criteria to assess creditworthiness. It opens up funding opportunities for businesses that may not qualify for a loan from a traditional bank.
Lower barriers to entry: Online lending platforms typically have lower barriers to entry, meaning it’s easier for small businesses and start-ups to access funding. It can be especially beneficial for businesses just starting and may need more resources or connections to secure a loan from a traditional bank.
Transparent pricing: Some online lending platforms have transparent pricing, meaning you can see the fees and interest rates associated with a loan before applying. It makes it easier to compare options and decide on the best loan for your business.
Online application and management: The majority of online lending platforms have the application and management process entirely online, making it easy to apply for a loan, track the status of your application, and manage your loan. It can save time and streamline the process, compared to traditional banks’ more time-consuming and paper-based approach.
Personalized loan offers: Some online lending platforms use advanced algorithms to analyze your creditworthiness and offer personalized loan terms based on your business needs and financials. It help’s to ensure that you’re getting the best deal possible and that the loan terms are tailored to your unique circumstances.
A larger pool of investors: Online lending platforms connect borrowers with a large pool of investors, increasing the chances of getting approved for a loan and better loan terms. This wider pool of potential investors can increase competition, leading to lower interest rates and more favorable loan terms.
Borrowing funds from online lending platforms can offer a range of benefits for small businesses, including faster application and approval processes, more flexible loan terms, lower barriers to entry, transparent pricing, online application and management, personalized loan offers, and access to a larger pool of investors.
Comparison Between Online Lending Platforms & Traditional Banks
|Criteria||Online Lending Platforms||Traditional Banks|
|Speed of Loan Application Process||Faster||Slower|
|Types of Loans Offered||Personal and small business loans||Wides range of loan products|
|Interest Rates and Fees||Higher interest rates and fees, but more flexible loan terms||Lower interest rates and fees, but less flexible loan terms|
|Regulatory Oversight||Less regulated, higher risk of fraud||More regulated, more excellent protection for borrowers|
Online lending platforms and traditional banks both offer loan services, but there are significant differences between them that impact the borrowing experience. Here, we compare these two options.
Speed of Loan Application Process: The loan application process is faster and more streamlined with online lending platforms. Some options even provide loan decisions and funding within a few days. In contrast, traditional banks may take several weeks or months to process a loan application.
Types of Loans Offered: Online lending platforms mainly focus on personal loans and small business loans, whereas traditional banks offer a more comprehensive range of loan products, including mortgages, auto loans, and lines of credit.
Interest Rates and Fees: Interest rates and fees differ between online lending platforms and traditional banks. Online lending platforms may have higher interest rates and fees but offer more flexible loan terms. Conversely, traditional banks may have lower interest rates and fees but have more stringent loan terms.
Regulatory Oversight: Online lending platforms do not have the same level of regulatory oversight as traditional banks, making it easier to get a loan but also increasing the risk of fraud or predatory lending practices. Conversely, traditional banks are subject to more regulations, providing more excellent protection for borrowers.
When deciding which option is best for your borrowing needs, it’s crucial to consider these differences, including the speed of the loan application process, types of loans offered, interest rates and fees, and regulatory oversight.
What is Expense Management software & Why Is it needed?
Expense management software is the process of tracking, monitoring, and controlling business expenses in an organized and efficient manner. It can include personnel, operations, travel, and other costs associated with running a business. An expense management system is a software solution that helps companies to automate this process.
Expense management software is crucial for several reasons:
Improved financial visibility: By tracking and monitoring expenses, businesses can better understand where their money is going and make more informed decisions about future spending.
Increased efficiency: An expense management system automates many manual expense tracking and reporting processes, reducing the time and resources needed to manage expenses.
Improved accuracy: Automating the expense tracking process can help reduce the risk of errors and ensure that expenses are recorded accurately and consistently.
Better compliance: By tracking expenses in a centralized system, businesses can ensure compliance with regulations and policies related to expenses and spending.
Enhanced control: With a centralized system for managing expenses, businesses can have more control over their spending and ensure that expenses are aligned with their budget and financial goals.
Benefits of Expense Management System:
- Improved financial visibility
- Increased efficiency
- Improved accuracy
- Better compliance
- Enhanced control
Expense management is essential to running a business effectively and efficiently. By automating the expense tracking process with an expense management system, companies can enjoy improved financial visibility, efficiency, accuracy, compliance, and control over their spending.
Case Study: An SME Business Gets Funding through an Online Lending Platform
A small to medium-sized business, ABC Infoline Pune Ltd., faced financial difficulties and needed funding to keep the business running. The business owner, Ravi, decided to try an online lending platform to see if he could get the funding he needed. After researching several options, he decided to apply for a loan through Easebuzz.
The loan application process was simple, and Ravi received a loan decision and funding within a few days. It’s a faster process than he would have experienced if he had applied for a loan through a traditional bank. With the funding in hand, John could keep the business running and pay his employees.
However, Ravi soon realized he needed to optimize his expense management to use the funding to its full potential. Easebuzz offered several solutions to help him manage his expenses and optimize his financing use. The first solution was the Easebuzz NEO platform, which provided Ravi with a comprehensive view of his expenses and allowed him to categorize and track his spending in real time.
The second solution was the Easebuzz SmartX platform, which offered advanced expense management tools, including a budgeting tool, a cash flow forecasting tool, and a financial dashboard. With these tools help, Ravi could track his spending, stay on budget, and make informed financial decisions. He could also see how his business was performing financially and make changes as needed to ensure long-term success.
In conclusion, Ravi got the funding he needed through Easebuzz. With the help of the Easebuzz NEO and SmartX platforms, he optimized his expense management and used the budget to its full potential.
What are the Solutions That Easebuzz Offers?
Easebuzz offers two products, Easebuzz NEO and SmartX, which are designed to help businesses manage their expenses and optimize their use of funding.
Easebuzz NEO is an easy-to-use platform that provides businesses with a comprehensive view of their expenses and allows them to categorize and track their spending in real time. This platform is perfect for companies of all sizes and can help them stay on top of their expenses, track their spending, and make informed financial decisions.
Easebuzz SmartX is an advanced expense management platform that offers a range of powerful tools to help businesses optimize their use of funding. With the help of the budgeting tool, cash flow forecasting tool, and financial dashboard, companies can see how they perform financially and make changes as needed to ensure long-term success. Additionally, the SmartX platform allows businesses to automate many of their financial processes, making it easier to manage their finances and focus on running their business.
Whether you’re a small business owner, a financial manager, or a CEO, Easebuzz can help you manage your expenses and optimize your use of funding. With its user-friendly platforms and advanced tools, Easebuzz is the perfect solution for businesses of all sizes looking to streamline their financial processes and ensure long-term success.
Online lending platforms can provide small businesses the funds they need to grow and succeed. However, it is crucial for these businesses also to optimize their expense management to ensure that they are using their funding to its full potential. Implementing an expense management system can help businesses increase efficiency, improve accuracy, and have better control over their spending.