FinTech or Human?

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by Brian Dineen

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02.17.2021

The most significant disruptor, or innovation – depending on your perspective , in the last decade or more in small business lending is FinTech (Financial Technology). It has led to some of the most drastic changes ever seen in the small business borrowing process. While the technology provided some critical benefits, it also created some gaps in the borrower experience. Let’s review the pros and cons of using FinTech when applying for a loan.

I’ll start with the benefits of using FinTech. The first is speed. Given that data is collected and processed in real time on these platforms means that approvals can be generated quickly, often within 24 hours. For borrowers that want the money quickly this is an ideal process. The faster they get it, the sooner they can move forward by using it, or alternatively – quickly correct any temporary cash crunch.

The speed factor leads right into the technology’s most effective benefit – efficiency. For small business owners with a full array of responsibilities on their plate daily, this is a game changer. The platforms continually upgrade their online tools to improve ease of use. Compound that with automated processes for communication, updates, customer service, billing, payments, and providing the customer the ability to do this from anywhere through tablets or phones, and this is a huge time saver for the customer. Finally, FinTech goes to great lengths to provide state of the art security to protect its customers.

The primary drawback to the technology is a lack of in-depth advice for the borrower. There may be alternative financing options to the standard product offered that are a better fit for your business. No robot is going to point that out to you. Also, should you have an unusual event that either mitigates some negative aspect of your profile as a borrower or provides irrefutable evidence of a forthcoming positive change of significance, there often is no way to allow that to weigh in using an automated underwriting process. This could cost you an approval you may otherwise attained by interacting with an experienced loan representative. And for now, although this is likely changing, FinTech platforms tend to offer a narrowly focused product or series of products from the same family – limiting your options.

Like any new innovation, FinTech is not perfect. It may be right for you, it may not. If you already know exactly what you want from a loan (or need), there are no unusual circumstances within your business (COVID aside – the relief for that won’t last forever), you know your specific budget, or if you have to have it now regardless, then FinTech may be the correct borrowing path for you. If any of those conditions do not describe your situation, you might consider using a more traditional route with some advisory help along the way.

If you would like to explore the question of FinTech being right for your business – or not – feel free to contact me.

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About the Author

Brian Dineen

Brian Dineen is the owner of Trinity Capital Partners. Mr. Dineen has experience in all facets of the commercial lending industry. His expertise includes credit evaluation, underwriting, collateral valuation, lease structuring, loan packaging, and loan/lease closing.

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