“The way to get started is to quit talking and start doing,” said Walt Disney. While this is true, upcoming entrepreneurs often require financing to start and keep operations running. By giving access to credit, banks encourage the growth of small-scale industries, but the supply is unable to meet the demand. The global Fintech industry is proliferating, with over 41 billion invested in the first half of 2018. Fintech lenders have continued to support investments and industrialization by granting loans to budding entrepreneurs who fail to meet the traditional requirements. If you seek funding to finance your new venture, weighing to find the better option of the two is crucial.
Benefits of A Fintech Business Loan
The flexibility of application and processing time
Presently, banks in India do not open on Sundays, 2nd and 4th Saturdays, and on gazetted holidays. Since banks require that you physically visit a branch when applying for finance, it means that there are days when you will not be making progress towards securing your loan. On the other hand, you can contact a Fintech Company any day from your computer or smartphone. Similarly, banks may take up to a few weeks to verify the credibility of your business organization before approving your eligibility for funding. Based on the time factor, Fintech is a better option because the process from submission to approval of your loan is digitized, hence quicker.
Prepayment penalties
Traditional lending policies in India require that borrowers be penalized if they repay earlier than the agreed time. If your business does exemplary well upon starting and you wish to repay your loan earlier, you could be charged at least 5% as a penalty. Fintech has lessened this inconvenience by offering low or no pre-closure penalties. Also, their flexible terms of repayment grant you the liberty to settle your debt without pressuring your operations or affecting your personal funds.
Years in business and nature of operations
In both private and public spaces, banks lend businesses that have been operational for an average of 5 years, which is an impossible requirement if you are just getting started. Financial technology companies grant loans to businesses even if they have not been operational for long. Additionally, if you had a rather unconventional business idea and the banks are not willing to offer you a loan, Fintech could save the day. It supports modern businesses by lending to digital marketing organizations, e-commerce businesses, and other technology-based ventures.
Based on these factors, it is evident that financial technology companies have the upper hand. However, banks too have their advantages including a broad existing customer base and low cost of capital. The good news is that nowadays, some market players from the two options are overlooking competition by merging to work together for a common goal. All in all, while seeking to use either, be sure to conduct thorough research depending on your location and nature of the business.
