Business loans have been around for thousands of years. Surprisingly though, little of how loans are actually made has changed over the last few centuries – at least, not until now. Thanks to advances in computer networks, blockchain and other technologies, business loans are being improved in ways never thought possible.

Any business owner looking to borrow money these days will discover a whole new world of business lending. Traditional banks and private lenders are now facing stiff competition from online lenders, and the methods through which they are making loans available are changing drastically. Technology is a wonderful thing.

Check out these five ways that technology is making a difference for both business lenders and borrowers:

1. Faster Approval Times

It used to be that applying for a business loan was a long, complicated process that could take weeks. Applicants had to procure the paperwork, complete it, and submit it for examination and approval. But that was just the start. Multiple approvals had to be given by an officer at each level of the approval process. Just getting an answer could take more than a week.

Technology has changed the game by eliminating a lot of the inefficiencies of the old paper processing method. Electronic applications are much faster to authenticate, easier to approve, and more efficient when it comes to channelling them through all of the approval layers. Indeed, applicants can generally get pre-approval within minutes. After that, it is a simple matter of verifying application information.

2. Direct Deposit Funding

The whole idea of applying for a business loan online is to keep everything as electronic as possible. An obvious end result of this philosophy is utilising direct deposits to fund approved loans. Borrowers no longer have to go to the bank to receive a paper cheque that must then be deposited into a business bank account. Financial institutions, both public and private, can transfer funding directly from their own accounts to the borrower’s account. Electronic funds transfers (EFTs) in the modern world can be completed in as little as 24 hours.

 

3. Increased Competition

Opening up business loans to the digital world has had quite an effect on lender competition. Before the technology age, shopping around for a business loan meant contacting multiple lenders to either set up a face-to-face interview or conduct it over the phone. All of this took a tremendous amount of time. Competition was stifled as a result.

Today’s borrowers can jump online and compare multiple business loans within minutes. That mean lenders can no longer afford to be lax with either marketing or outreach. Technology has forced them to work a lot harder to win customers. That is good for borrowers.

4. Increased Transparency

The world learned a lot of important lessons from the previous decade’s global financial crisis. Among them was the need for more transparency in the financial sector. Various governments implemented new rules that forced financial institutions to be more transparent – and to use technology to do so. Business lending has never been more transparent than it is today.

5. Higher Approval Rates

Fifth, and perhaps most importantly, technology has led to higher approval rates for small business loans. Why? Because lenders who choose to operate primarily online use different methods of measuring risk. Rather than looking at industries, they look more closely at individual borrowers. They look at credit reports, non-traditional assets, the length of time a business has been operating, etc.

Also consider that technology reduces the overhead costs of banking. Lower overhead costs make it more lucrative to do business with small business owners. Lenders can earn more profit on a large group of small-business owners than they can on a single corporate borrower.

Technology has changed business lending for the better. Today’s business loans are much more accessible and customer friendly thanks to the changes wrought by technology.