Why Digital Lending Solutions are Reshaping Startup Finance
The age of technology has disrupted every industry sector and paved the way for millions of startups. Every year, there are more than 50 million startup businesses, and digital lending solutions are one reason why so many entrepreneurs manage to get their businesses off the ground.
In the past, a new business venture could take years to shape, mainly because of a lack of access to financing, as startups were reliant on traditional bank loans. The conventional loan application process has always been long-winded, with hurdles, challenges, and red tape to cut through before reaching approval (or refusal). Nowadays, thanks to the rise of fintech, there are far more options and opportunities for startups than ever before – and digital lending solutions have opened doors where they may well have stayed firmly shut in the past.
Much of that is down to better accessibility to different loan types, a faster approval process, the removal of the middleman, more significant potential for flexibility in terms of interest rates, loan terms, and repayments, and a faster process. Startup entrepreneurs can jump online, use loan comparison websites, and find the right loan for their needs in minutes, with funds sometimes available within 24 hours. The whole process is extraordinarily streamlined, making business loans more accessible to those who do not have the same collateral as their larger, more established counterparts.
Auto-Loans, Helping Entrepreneurs Invest in Business Mobility
The number one type of loan for a startup is a business loan, although some very small ventures use personal loans for smaller amounts. Having said that, more and more startups also look for auto loans, in particular those whose businesses rely on deliveries. One website that’s especially popular for car loans for businesses is Autolaina; it’s focused on supplying small businesses (including startups and entrepreneurs) with access to business mobility. For example, this website has helped thousands of small online businesses who need transportation to deliver goods. Business vehicle loans have never been easy to acquire for young companies, often because of a lack of collateral and hefty interest repayments. Autolaina has reshaped the landscape; its offerings are tailored to each individual startup, and rates as well as loan terms are extremely favorable.
Home Office and Coworking Loans – Financing Workspaces for Startup Growth
While plenty of startups begin at home, those who show early signs of progress and success soon grow out of their workspace. Although there are working spaces available in cafés, libraries, and other spaces, nothing quite matches having a designated office space or a co-working space to build from the ground up! However, a brand-new office is an expensive outlay, and while rentals are usually a better option, that cost, too, can be extraordinarily steep depending on where the startup is located.
Co-working is a good possibility, too, but again, depending on location, it too can become a large business expense. That’s why home office and coworking loans are becoming invaluable. These newer types of office space loans are proving vitally important for startups, and some digital lenders are helping to change the trajectory by offering these types of loans to new businesses. Remonttilaina is one such digital lender, with a strong startup following, renowned for excellent digital lending solutions, rates, and terms. It’s fast becoming the go-to for entrepreneurs who want to improve their office space – or move to their own affordable premises.
Flexible Credit Solutions for Business and Personal Finance
Of course, new businesses want flexible credit because building a new business from scratch means cash flow is likely volatile. In the past, banks have penalized startups or new businesses for this reason, but nowadays, certain digital lenders, such as Joustoluotto, are more understanding. According to this website, businesses need flexibility and time to prove themselves! That’s why Joustoluotto provides a wide range of flexible credit solutions for businesses (and not just startups either). It’s worth mentioning that this digital lender also offers preferential rates and terms for personal finance,e too – often an option for very small startups who don’t require huge sums of money.
How Startup Founders Can Avoid High-Interest Loan Traps
The digital lenders mentioned above are all tried and tested and endorsed by startups and larger businesses alike – but what about other lenders, both online and offline? Here are some tips to help startup founders avoid high-interest loan traps:
- Using loan comparison websites, identify the right loan type for the startup in question
- Gain a clear understanding of the debt-to-equity ratio for the startup loan
- Check the terms and conditions and make sure they’re favorable
- Choose a lender that specializes in digital lending solutions FOR small businesses
- Conduct due diligence on preferred loan providers – read the small print!
- Double-check that the repayments are affordable and the length of term suitable; could an extra six months or a year help spread the cost even more?
- Is collateral a prerequisite, and if so, how big of a risk is there?
- Watch out for undisclosed fees and penalties!
Financial Literacy for Sustainable Startup Success
It’s encouraging that today, acquiring a loan for a startup venture is much more accessible than ever before, thanks to an explosion of digital lenders challenging traditional loan models offered by banks. However, while many online loan companies are perfectly legitimate, it’s essential to do research and to ensure sound financial literacy. It’s also crucial to have a succinct business plan displaying how the loan will be used, projected cash flow, profitability, and scaling.
The business plan should detail information for up to five years (and beyond) without being too over-cautious or too bold. It’s better to be conservative with figures. Without deep consideration, a business plan, and a good level of financial literacy, startups could find themselves flailing. Plus, entrepreneurs must have a strong understanding of the digital loan they’re taking out, the rates, terms, fees, and penalties. They must also understand the risk of collateral and take care to research their preferred lender. If all of the aforementioned is in place, then a startup loan could well lead to tremendous business success.
Image Credit: Photo by Bench Accounting; Unsplash
