Small business loans represent a fast-growing segment for most financial institutions including banks and NBFCs. With a boom in entrepreneurship and the growing number of start-ups, there is a growing need for small business financing. However, not everyone finds it easy to meet the small business loan eligibility criteria set by financial institutions or tackle the high small business loan interest rates in case collateral cannot be furnished. To Get small business financing from public/private sector banks and NBFCs is always an option but there are several aspects to keep in mind.
Small businesses can also consider some fast-growing financing trends that are expected to dominate the industry in the near future. These trends indicate better and easier avenues for companies to secure funding rather than going to conventional lenders.
Here are five popular small business financing trends to watch out for:
- Alternative Online Lending- Online lending platforms are here to stay and should be a major source of funding for small businesses in the future. Online fintech companies are already sprouting up across the country and online lending platforms are being set up to provide faster access to funds for businesses. Online application and document submission procedures are being supplemented by fast processing and instant online approvals. However, companies need to be careful about the interest rates and other terms and conditions before applying. They should also do a background check on the online lender in order to ensure future safety.
- Crowdfunding- Crowdfunding platforms are aplenty and this is another innovative measure for raising funds. Crowdfunding will be a major small business financing trend of the future where entrepreneurs can post a new service/product, grow customer bases and get funding for the same from multiple people.
- ROBS (Rollover as Business Startup)- There will be several baby boomers or people aged between roughly 53 and 71 who will be retiring and may invest their retirement kitty or other funds into financing small businesses. This is one strategy, which is known as Rollover as Business Startup and this will also help the investors save on taxes. Small businesses may use this as a viable channel for garnering funds. They will be able to obtain funding at lower rates of interest minus extensive documentation and verifications.
- Bootstrapping- Bootstrapping will continue being a small business financing trend according to experts. Bootstrapping is one of the simplest and oldest ways of raising funds. There are no interest rates, extra costs and complexities to deal with since entrepreneurs raise funds themselves or get the same from friends and relatives.
- P2P Lending- Peer to Peer Lending or P2P Lending is a more specific crowdfunding type. Borrowers can get unsecured business loans from lenders through a platform. Both lenders and borrowers pay certain fees to the platform, which helps in creating the mutual agreement between the two parties. The rate of interest is either fixed by the platform or through an agreement between the borrower and lender.