According to Business.com, “Technological advances and the expansion of big data are impacting nearly every facet of business, including the business loan process.” The result of these improvements has been increased efficiencies, the speed of funding and the improved accuracy of evaluations. Thankfully for small businesses, this means applying for a business loan is accompanied with the possibility to be approved within minutes, versus days or even weeks.
Technology and big data have benefits for both lenders and business owners. Alternative lenders have more information at their disposal than ever before, allowing them to make informed lending decisions. In addition, business owners can effortlessly apply for funding thanks to e-signature software and online applications.
Understanding big data is important and actually quite relevant to businesses in all industries. “Big data” simply describes a whole new way of analyzing patterns and making predictions by using numerous kinds of information. Big data includes a wide array of information, including: social media engagement, Yelp reviews, sales tracking software information and others. All of this information reveals useful information about a business. Lenders then combine all of this information and use it to evaluate the fitness of a small business for a loan.
A New Revolution
The majority of businesses are just now beginning to integrate big data and technology into their daily operations. Business owners should be aware that doing so really does place you in a better position to access capital, not to mention how implementing them improves operating performance. Business owners also need to be aware that capital markets are changing – especially for small and medium-sized businesses.
The JOBs Act, or Jumpstart Our Business Startups Act, is a law that is intended to encourage funding of U.S. small businesses. Signed by President Barack Obama on April 5, 2012, this law will have a dramatic impact on democratization of capital, crowdfunding and alternative lending. Funding is becoming more readily available to small enterprises, and technology and big data are playing a big part in the process.
According to Steve Sadler CEO of Allegiancy, a commercial real estate asset management firm based in Richmond, Virginia, “As transaction costs are reduced, capital can efficiently flow to younger companies and I expect we will see a stunning return of dynamism to our moribund entrepreneurial ranks.”
Good News for Alternative Lenders
With traditional small business lending declining for the last thirty years, this is great news to small businesses and alternative lenders. Alternative lenders have stepped in and built data-driven and technology-enabled platforms that are much more efficient than what traditional banks use. According to Sadler, “The availability of data allows for lenders to have increased visibility into other areas of payment history and credit, beyond the major credit bureaus. With this, alternative lenders have more data to make informed lending decisions.”
Consider the small business lending options with First American Merchant, for example. Through a proven platform, FAM offers a simple, fast and hassle-free online application process. Small businesses can secure the funding they need in as little as 72 hours. With options for funding growing – including alternative lenders – small business owners are in a great position to benefit from all of the new technology and big data improvements.