Small Business loan approval rates at big banks fell slightly in August to 13.6% compared to 13.8% in May. Even smaller lending institutions have tightened lending with a historic low approval rate of 18.5%. Given the challenges in acquiring traditional business loans and financing, small business owners raised concerns, signing a petition to urgently extend the CEBA loan assistance program. Following this, the government announced that it will extend the CEBA loan deadline to October 31, 2020.
This comes as good news for many small businesses that still find themselves struggling to pay down fixed costs and immediate obligations including rent and interest payments. Despite this, there are many small businesses that do not fit the criteria for emergency loan payments as they may not have employees on payroll or may not have business banking accounts. Beacon Advisors is a leading Toronto business brokerage that offers debt financing options for businesses. In such circumstances, struggling businesses have faced a liquidity crunch and several of them have shut down permanently.
Consequently, fintech lending platforms have been gaining popularity. These alternative lending platforms are widely being accepted by gig workers and small businesses who find themselves underserved and often overcharged by large financial institutions, due to factors like poor credit and high risk of business. With fintech lending platforms the financing process is quicker and more convenient as these platforms do not face the challenges that stem from heavy regulation and layers of corporate infrastructure.
Fintech lending platforms offer many benefits to its users. Through easy interface and efficient solutions aimed at underserved markets, these platforms have been able to add value to a niche demographic. Many of these App-based platforms can be accessed remotely through a cell phone and deliver new features and updates constantly to enhance user experience. Consequently, banks have been trying to compete with these new fintech companies and adopt a similar approach to lending.
The pandemic has accelerated the trend in fintech loan financing and this trend will continue to evolve with newer products aimed at specific industry sub-sectors. While the pandemic has presented certain challenges, it has allowed new ideas and innovation to flourish.