The change brought about by emergent digital technologies has upended entire industries and transformed how we think about doing business. The world of finance is no exception. This informational enlightenment has brought about an unlimited capacity for data visibility and engagement. Instantaneous scalability, on-demand access, and finely-tuned actionable analysis is more readily available then would have been previously comprehended.
Despite this, there are finance sectors that have been clinging to the digital dark ages. Small business lending is among those. Notoriously opaque and outdated, it continues to be reliant on patchworks of self-reported data and unstructured analysis. Now, more than ever, small business finance demands transparency. However, there is change on the horizon. Technology solutions from Infactor are driving alternative small business lending to the forefront of industry innovation.
Technological Expectations
Small business finance operates in a place of big expectations. We live in a world where transactions are timed in nanoseconds and data is processed in petaflops. What was once a super-computer now lives at the end of our fingertips. Instantaneous access and absolute data availability are no longer an aspiration, but an expectation. In this sense, alternative lenders are not just struggling to keeping up with small business industry standards, but need to deliver for their customers like technological powerhouses, some with research budgets in the billions. One recent example is company Acorns, a technology-driven solution to saving whereby each consumer transaction is rounded up to the nearest dollar, and the difference is stored in ETFs. This application was not considered a serious contender by finance professionals, until it was discovered that they have 3.5 million users. The finance market, like every other industry, will be won by those who are focused on the utilization of technology to drive simplicity, clarity, and ease of use.
Capital Markets Scrutiny
Thanks in no small part to a collateral-backed asset class that shall remain nameless, investor and other counterparty demands have changed. It goes without saying that data in the small business finance domain is unlike any other. Few asset classes are as complex in terms of collateral diversity, credit risk dimensions, and localized market dynamics. Despite this, or perhaps because of it, the call for absolute data availability continues to increase. Small business lending portfolios should be held to the same standards as highly homogenized debt vehicles despite the glaring variations. It is now the case that every bond trade is instantaneously listed on Bloomberg. The cost of capital in small-business finance will be improved for all parties by way of increased transparency across the entire sector.
Competitive Landscapes
The small businesses that are leveraging debt instruments are under rapidly increasing competitive pressures, and the alternative lenders who provide them are no different. Technology has enabled the benefits of scale to probe new dimensions, as those who can harvest massive data sets have powerful adaptive analytic tools to curate their strategies in ways in which they were previously unable. Small businesses have always thrived on agility: rapid responsiveness to a changing business landscape and a finely tuned understanding of market segments. To maintain this, they need the numbers laid out as clearly, plainly, openly and honestly as possible.
The Path Forward
Until recently, alternative small business lenders were significantly constrained by technological limitations. InFactor is changing how alternative small business finance approach origination and servicing, allowing them to compete in ways never thought possible. As a cloud-based, Software as a Service (SAAS) platform, inFactor’s value-based, frequent release agile delivery methodology ensures that lenders can keep pace with the industry’s rapid rate of change. The platform boasts a robust REST API to accomplish unlimited extensibility and sophisticated systems integration. Its suite of analytic tools has been expertly crafted to drive the insights unique to small business finance, and, most importantly, it is fully customizable to any business. Small business finance professionals no longer need to hassle with the customization of ‘out of the box’ solutions like Salesforce, or to undergo the frustrations of onboarding a new technology. The tech stack is fully customized to meet the needs of small and large factoring, origination, and servicing companies alike. Last (but not least), the persistent focus on security means that data remains protected, ensuring the ever-important element sought after in the drive towards transparency and clarity: trust.
