Types Of FinTech Business Loans

By Oscar Scolding on 6th January 2019

Technology is constantly shaping the world and has revolutionised the way in which many sectors currently operate. At the very forefront are brand new innovations that are starting to reform the financial industry, which includes the FinTech concept which had a standout year in 2018. The effects we’re seeing are incredibly similar to when the internet first came into circulation and began the long process of digitising almost every aspect of day-to-day life. Here, we’re exploring just how far FinTech’s influence can go.

What Is FinTech?

FinTech is the abbreviation for financial technology and essentially means businesses have chosen technological routes in order to update, modernise and increase the efficiency of their day to day business activity. Although many people would assume the rise of technology within finance would be a recent phenomenon, there are suggestions that imply that developments have been in place since the 1950s.

How Did FinTech Evolve?

Despite the fact many people incurred severe financial problems during the notorious crash that took place in 2008; the period was actually a key turning point for FinTech, since the disaster was used as a prime opportunity for people to decide how best to reform the industry for the better.

Many banking systems started to lose their reputation, which meant people started to develop trepidations about using their services. There were many negative implications as a result, not least the prolonged recession that caused a serious decline in the volume of lending being provided by banks. This then meant people had to seek alternative methods in which to obtain their desired loan agreement.

The economy is only just starting to recover, and there is every reason to believe that such events could take place in the future. For this reason, financial technology is now far more trusted among many entrepreneurs and business owners around the world, as a significant number are now starting to consider this option over more conventional routes.

What Are The Sectors That Operate Within Financial Technology?

A’s – This is essentially any large-scale financial establishment, the most common of which are long-running and established banking systems.

B’s – These are companies that have invested interest in banking, as well as a number of other sectors.

C’s – This is any company that aims to introduce new concepts and innovations that have been specifically designed to improve or enhance any technology that currently operates within the banking industry.

D’s – Anyone that enters the financial sector and introduces new ideas that could unsettle the current structure are known as disrupters. This is typically start-up businesses who have managed to find a niche in a specific marketplace.

Key Elements Of The Fintech Industry

No-one can really ascertain the exact scope when it comes to businesses introducing new technological ideas into the financial industry. The sector has proven to be one of the broadest when it comes to innovation and diversity. There are now a number of core elements behind finance that use technology, and below, we’ve listed some of the most prominent.

Mobile Devices

The younger demographic are constantly using mobile devices in order to navigate their way through each day. Any financial technology company will need to take this into consideration for their strategies since mobile devices are the sure fire way to distribute tools and information in an incredibly efficient manner.

Building Trust

The financial problems people endured during the 2008 crisis has meant many people have started to lose trust in the banking system. Unless relationships and trust are established between a financial technology company and their customers, there is a reason to believe that the same issues could take place in the future.

Taking On the Social Climate

There are so many social challenges that people face across the globe. One of the key issues is the lack of business bank accounts available to third world countries; which is why the financial technology industry have put provisions in place to build online banking networks for such locations.

What Are The Different Types Of FinTech Loans?

FinTech has not only introduced ways to improve the financial markets as a whole, however – it has also improved lending. Here we have highlighted some of the most common business loans that come from financial technology:

Fintech SBA Loans

There is a common misconception that SBA loans are not applicable within financial technology; however certain measures have meant such agreements can be taken out within minutes and put in place within 10 working days.

SBA has always placed streamlined customer experience at the height of their service, which means anyone can take out loans similar to rates offered by banks within effective timeframes. With this type of loan, you are likely to experience rates of around 6-8% and can agreement periods of up to 10 years.

Mid-Prime FinTech Loans

This is perhaps the most common loan agreement that many smaller sized businesses are likely to opt for. There is far less commotion when it comes to implementing Mid Prime FinTech loans, especially compared to the aforementioned SBA option.

One of the core benefits for taking this route is the fact you won’t need to visit a bank and spend a considerable amount of time providing relevant documentation that highlights your credentials. Instead, you will simply need to fill out information online and you will receive a verdict in a matter of minutes. Rates are usually as low as 9%, and the terms are agreed between 1-5 years.

FinTech Cash Advance

This isn’t a loan, but rather the sale of any revenue your company is going to likely make in the near future to a FinTech lender, who will in exchange give you financial support upfront. In order to issue this strategy, your FinTech company will need to have access to your cash-flow, as well as the frequency in which you make deposits.

A determination will then be made as to how much money you are likely to be able to pay back, you will then be given a financial plan that needs to be financed over 4-21 month period. The terms can be agreed between 4 months – 2 years and factor rates are around 1.16-1.50%.

For more information about FinTech Technology, you can contact any member of our highly experienced and dedicated team, by calling us at 0203 880 9880.