The Rise of Alternative Lending During COVID-19

0
225
Alternative Lending

Alternative lending has played a major role in helping businesses to stay afloat during the pandemic and it is an area of finance that is going from strength to strength. Essentially, alternative lending is funding that comes from non-traditional sources (banks) that are not as tightly regulated and can often provide greater flexibility. These institutions can carry out similar tasks to banks but do not have a full banking license.

Alternative Lending On the Rise

Alternative lending has exploded in popularity in recent times and it is easy to see why. It is not always easy for small businesses to get approved for a loan by a bank, so alternative lending can be a great solution. Traditional banks still hold the largest market share for lending, but growth has slowed and alternative lending is taking up a larger market share.

Beneficial For SME’s

With many people now starting their own small businesses, this is likely to continue as alternative lenders can use AI to efficiently onboard customers and this can be quicker and easier than a credit check. Small business owners can turn to alternative lenders when starting a business, managing a difficult period, or going through growth and know that they are likely to get approved.

Looking Ahead

Looking ahead to 2022, it looks like it will be another big year for alternative lenders. Many companies are still struggling as a result of COVID-19 while there are also many that will be looking to grow. On top of this, many people will be starting their own businesses or starting freelance work and requiring capital to get up and running. Applying for a loan from a bank could be time-consuming and those with a bad credit report may struggle to get approved.

Many alternative lenders also use digital lending platforms that can greatly enhance the customer experience and make the loan application process much more straightforward. Additionally, advanced tech also means that decisions can be made quickly.

Flexibility is Key

It is true that many banks are now adopting AI and making the application process easier, but despite this, they must still abide by regulatory policies that prevent them from being as competitive as alternative lenders. Fintech companies and alternative lenders can be much more flexible with their funding and this will make them much more attractive to entrepreneurs and those seeking funding for their business.

Alternative lending has disrupted the financial market in recent years, especially in a time when many businesses need quick and easy access to funding. This looks set to continue in 2022 with more businesses requiring financial support and alternative lending developing a positive reputation for the flexibility and easy application process compared to traditional lending which is much more rigid and regulated.