The state of business lending and funding is ever-changing. New laws are passed, updated business practices are put in place, and entrepreneurs are starting businesses every day. There are some surprising trends on the list for 2019 small business lending and funding, so keep reading to find out more.
Traditional bank loans
Although alternative lenders have recently risen in popularity, entrepreneurs will go back to relying on traditional bank loans more than they were last year, according to Daniel Levine, director at the Avant-Guide Institute. This, he says, is due to more aggressive lending policies of government-backed small business loans.
"Local banks especially are looking to deliver funding with fewer roadblocks and greater speed," Levine said.
He added that more dollars will be going to manufacturing companies, early-stage businesses and rural businesses in particular.
Nate Masterson, CMO of Maple Holistics, notes that traditional bank loans are always a great option as long as you have a good credit score.
"The perks of getting a traditional bank loan are numerous," he said. "They tend to have low interest rates, help build you business credit, and assist in creating a relationship with a personal banker, which is always good to have in your back pocket."
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Truth in Lending Act
This California act requires lenders to tell small business loan applicants the annualized rate they'd pay for financing. It's not a standard practice at this time in most states, said Levine, but is expected to spread to other states.
The act protects small business owners against inaccurate and unfair credit billing and credit card practices, according to the U.S. Department of Treasury. One of the main points of providing entrepreneurs with loan cost information is so that they can use that information to shop around and compare loans. For more information on the act, visit the Department of Treasury website.
"The Truth in Lending Act can only have positive ramifications as far as I can see," noted Masterson. "That's why it passed with a bipartisan vote. Any bill that increases transparency in any sector, but especially in business, anything that helps small businesses flourish, is sure to boost the economy."
Next year, lenders are looking to move the lending process fully online, as people become increasingly comfortable with conducting business digitally. Masterson said one new frontier will be all-inclusive lending options.
"This comes in the wake of the iteration of online marketing, which shows companies in tangible ways how the possibilities on the internet really are limitless," he said. [Read related article: Non-Bank Financing Methods for Startups]
Nick Chandi, CEO and co-founder of PayPie, believes that as the demand for small business capital increases, so will the sophistication of the technology used throughout the entire small lending process.
"Alternative and online lenders have already started this trend, which will only continue to accelerate by leveraging artificial intelligence, machine learning and permissioned blockchains," he said.
Chandi noted that traditional practices are overwhelmed with inefficiencies, manual data entry and extremely high error rates.
"The alternative and online lenders embracing innovation will be the ones to usher in this change and transform this market altogether," he added.