Why are Fintech Lenders Better Than Bank Lenders?
Traditionally, bank lenders have been the most acceptable medium of borrowing business loans. After all, they have been present in the financing system for decades. It wouldn’t be incorrect to say that businessmen consider banks as the tried and tested option for loans.
However, it is also true that bank loans have their own drawbacks namely:
- The bank loan application process is quite tedious and time-consuming. It may take weeks to months before the banks sanction a loan.
- Banks charge a high-interest rate on loans and have stringent repayment terms.
- Banks require mortgage against loans to reduce their risk factor. This condition can specially post a challenge for MSMEs which are often low on resources and find it difficult to put real estate, equipment or any other physical asset as mortgage.
- Banks do not provide loans to enterprises with negative cash flow or poor credit history.
- Banks do not have specialized loans for MSMEs. This means that they either don’t provide small ticket loans and even if they do, it would be against strict terms.
- Banks do not prefer lending to MSMEs because they earn less profit on such loans.
As you can understand, these limitations make bank lenders unattractive. A large organization can easily afford bank loans. However, MSMEs can have trouble convincing bankers to lend. And, even if they do, it is really not on favorable terms and conditions.
The good news is that fintech lenders are making it easier for businesses, irrespective of their size, to access loans. For the uninitiated, fintech loans are an alternate lending medium. The fintech companies are offering business loans leverage technology to offer affordable loans with quick turnaround time.
Let’s take a look at their advantages:
- Fintech lenders provide online loans. You can fill an online application form and upload the required documents in 15-30 minutes. The moment the fintech lenders receive the application, they generate a credit score in less than a day. The credit score is calculated to determine the creditworthiness of the business seeking a loan. So, the application formalities are paperless, minimal and fast. In fact, you can get a loan approved in less than a week! You can apply for the loan right from the comfort of your office or home without needing to visit a bank.
- The biggest advantage of fintech loans is that you are not required to mortgage any property against loans. This means you can get collateral free loans! You can borrow a loan with complete peace of mind.
- Usually, the ticket size of the loan ranges between Rs15,000 and Rs 1 crore. You can borrow loan as per your business requirement.
- Fintech lenders provide loans at a competitive rate of interest.
- The repayment terms are very flexible. The tenure of loans varies from one month to year while the payments can be made on weekly to monthly basis as per your convenience.
- The fintech lending process is completely transparent as all transactions are conducted online. So, you can rest assured that no hidden charges pop-up later.
- Since you can avail affordable loans from fintech lenders and even repay it with ease, your credit score also tends to improve.
If you are looking for collateral-free loans with fast approval and flexible terms, then fintech lenders definitely score over bank lenders.