2020 was undoubtedly a challenging year for businesses worldwide with many experiencing unprecedented levels of hardship. As a result, government loans alongside other business loans and grants took center stage in supporting businesses in their resilience towards economic uncertainty.
However, as we head into the year 2021, business owners should keep themselves informed about the top business loan trends that will govern the lending market in the year ahead.
1. Technology-Driven Financing Solutions
One thing that the year 2020 taught us is that businesses need to be prepared for any sudden changes to their routine operations, and technology has allowed that. Advanced technologies have been the driving force behind business financing, and in 2021, there will be a further rise in the use of technology-driven financing solutions. Business owners will inevitably be drawn to financing solutions that not only provide flexible funding but also streamline and automate financial processes to reduce costs.
2. Crowdfunding Alternatives
Crowdfunding has been a viable financing alternative for businesses to raise capital. It’s not a new concept, but it could represent a shift in 2021 due to the pandemic’s impact. The concept of crowdfunding comes with no interest rates or a fixed repayment schedule and allows businesses to borrow funds directly from potential investors. The trend of small business owners choosing crowdfunding to gain access to finance has recently seen the growth of more specialized crowdfunding platforms that focus on distinct markets.
3. Non-Traditional Lenders
Over the years, traditional banks like to get back collateral for the loans made to the business. The search for alternative financing options has resulted in an increase in non-traditional lenders offering business loans. These lenders include private companies and investors who may have helped entrepreneurs in the past. Now, there are several options like Unsecured Capital, where business loans can be obtained without collateral.
4. Invoice Financing
Invoice financing, also known as receivables finance, has always been one of the most effective ways to raise business finance. It involves businesses borrowing money against the value of their outstanding invoices. The process relieves businesses of the burden of waiting for a particular invoice’s payment, as cash tied up in invoices can be released through automatic funding lines. The growth of small business owners who need to manage cash flow crunches has renewed interest in this type of financing.
In conclusion, business ownership and management will rely on having an in-depth knowledge of available financing options in 2021. Emerging trends like technology-driven financing solutions, crowdfunding alternatives, non-traditional lenders, and invoice financing, amongst others, are shaping the future of business financing. Business owners have to pay attention and leverage these new opportunities to keep their businesses functioning and moving forward.
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