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Tuesday, January 3, 2017

Three Tech Trends That Will Impact Small Business Lending


Three Tech Trends That Will Impact Small Business Lending
Forbes

Optimism seems to be abound, economically at least, with a businessman heading for the White House. The Dow has risen and, despite vocal opposition from opponents on many of his decisions, President-elect Trump has been announcing job creation measures even before he has taken the oath of office.

For Wall St. and Main St., exciting things are happening. Banks and FinTech companies are using technological advances to improve access to capital, which is the lifeblood for small business growth. These developments bode well for small businesses in search of capital in 2017. Here are three financial technology (FinTech) trends to watch in the coming months:

Artificial Intelligence


Artificial Intelligence, or AI, refers to the development of computer systems that can perform tasks that usually require human intelligence.

AI is causing a transformation in small business lending by improving credit assessment, financial product development, and loan decision-making.

For instance, FinTech companies are partnering with online accounting software platforms, and that the data collected is used to target business owners in need of financing. Thus, Artificial Intelligence enables lenders to offer ever more personalized unsecured business loans. In 2017 and in the coming years, its importance will grow tremendously.

Convergence


While marketplace lending currently accounts a relatively small percentage of the small business loan transactions today, technological innovations are forging partnerships between banks and marketplace lenders that could never have been seen a few years ago. Convergence is on the uptick and this will continue into 2017. Traditionally, banks have been conservative, slow-moving and bogged down in paperwork, but in the 21st century, the lending process has changed dramatically.

Marketplace lenders have brought speed, technological developments and lesser burdens of regulation to the table, while banks offer loan products and deposit customers with proprietary data. Combining their strengths enables both banks and upstart FinTech firms to profitably originate and process small loans more efficiently.

Borrowers and lenders both benefit. Lenders are able to process transactions more quickly while mitigating risk through big data analysis. For small business owners in search of capital, money can be obtained faster and often at more attractive rates than were offered by alternative lenders, such as cash advance companies.

Serving The Underserved


Banks are being encouraged to fund minority business owners and ventures in economically disadvantaged areas. Meanwhile, marketplace lenders are in the forefront of providing capital to entrepreneurs and communities where their small business financing needs are not being met.

With optimism from the business community and from Wall Street since Donald Trump’s election, banks and other lenders are likely to let the cash flow to businesses owned by women, African Americans, Hispanics, and immigrants. These entrepreneurs many times were shunned by banks in the past.

The National Federation of Independent Businesses’ November index of small business optimism climbed from 94.9 to 98.4  its sharpest surge since 2009. This increase coincided with the election results. No matter who they voted for, jobs and economic growth are important to Americans. A business-friendly administration and evolving technology will mark the first year of Trump’s Administration.

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