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Internet Finance Options

The move away from traditional bank lending looks set to grow, according to finance experts. Alternative lenders and new financing options are being opened up for small businesses, using the internet as a vital tool. Lending is seen as a ‘new frontier’, with micro-financiers bringing new hope to many companies.

New Lending Options

Andy Haldane, a director at the Bank of England, recently highlighted this. He believes that this model of business funding is set to spread.

Peer-to-peer lending, using the internet as a vital tool, looks like it will grow into a competitive – and vital – sector. Though this is only a tiny segment of the finance options available, this looks set to expand. After all, as Haldane says, Google was once also equally tiny.

He continues, “The banking middle men may in time become the surplus links in the chain. Where music and publishing have led, finance could follow. An information web, linked by a common language, makes that disintermediated model of finance a more realistic possibility.”

Differences

The difference between alternative lenders such as Zopa and Funding Circle is that the individual lender or investor takes the credit and lending risk – which a bank would insure against in traditional. However, interest rates are far lower, as high interest rates are the hidden premium for this extra protection in bank loans.

These types of financiers do conduct all the same credit checks and have access to all the same credit assessment data as traditional banks. They’re not just lending to anybody, so risk can be minimised for lenders alongside lower interest rates for borrowers.

This type of lending would reduce over-lending in good times and an acute shortage of lending in times of recession – something that banks suffer badly from. By stopping extremes within the credit lending cycle and making the lending process more transparent, pricing of credit can be more accurately achieved.

Alternative funding is an important thing to consider for any business struggling to get funding, improve cash flow or reinvigorate growth options.

 

 

Select Factoring.

 

 

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