As a small business owner, the world of lending may seem complicated and frustrating. Today I’m in downtown Manhattan at the Princeton Club, attending AltLend Summit 2015, a gathering of the biggest players in the alternative lending space. Here’s what you need to know.
Banks Are Looking To Get Into Alternative Lending
Banks essentially created their biggest lending competitors. After the market crash in 2008, banks started looking to fund bigger and bigger loans, and started ignoring the smaller businesses that were looking for capital. Alternative lenders saw this group of small business owners who were looking for capital and created ways to fund these companies. Now, banks are starting to look at ways to finance these small businesses again, and they’re running into some very stiff competition.
After hearing some of the key speakers today, I’m convinced that banks are going to start partnering with these alternative lenders, instead of trying to directly compete with them. It might be that they send the businesses they turn down to the alternative lenders, or they start building processes using the alternative lenders underwriting technology, small business owners are going to really get a boost from the competition created. While banks are heavily regulated and that is slowing them down, they are trying hard to enter the space and soon, they will.
More Competitors, Better Service
Speaking of competition, every conference I go to I see more and more alternative lenders, usually finding unique ways to underwrite loans. With more competitors in the space, alternative lenders are going to have to create better and better service, and work on creating more attractive loan options for these small business owners. There’s already a lot of players in the space, which is why Lendio has created a platform that shows you the best loan option for your business.
Things Are Changing Fast
According to this morning’s keynote by Brock Blake, our CEO, six things are going to start happening soon in the alternative lending space.
One, there will be more options, both loan products and lenders.
Two, the time it takes a small business owner to get a loan will be faster and faster.
Three, trust is going to be a huge part of the decision, lenders are going to have to become more transparent and educate better.
Four, increased regulation, for better or for worse, regulation is coming to the small business alternative lending market, and it’s going to change things quickly.
Five, underwriting is going to become more and more innovative, which means that it’s not always going to be about the credit score. Small business owners with a bad credit score but good revenues can already find funds through Lendio’s platform, but there might be other ways to evaluate a businesses credit worthiness.
Six, banks and innovative alternative lenders are going to start working together in ways that benefit everyone, including the small business owner.
I’ll have more to report tomorrow, see you then!