• Is business still evolving?
 

Business finance has evolved into different spheres over the last few decades. A lot of factors have played a significant role in this development. Companies have had new financing options now and then, making it possible to carry on with operations uninterrupted. To comprehend the state of business finance, it helps to take a look at where it has been, the present and what possibilities the future holds.

Moneylenders

Traditional moneylenders operated in much the same way as they do now. If a business needs to borrow money to finance its operations, it had to provide an item to act as security. Just like today, interest rates were tailored to suit the risks. The types of agreement between lenders and borrowers varied on a broad scale. There were laws in place to regulate moneylenders.

Bank Loans

Bank loans are the other business financing options that have been part of the evolution. To date, bank lending has remained the first alternatives when entities are looking to borrow money. Various banking institutions have specific requirements that borrowers have to meet when applying for loans. Typically, the credit history and the financial reputation of a company will play a big part. Over the years, borrowing from banks has evolved with the use of modern technology. Financial regulations for bank lending have also changed to cater to the changing needs of borrowers. Banks provide different types of loans such as debt financing to suit borrowing needs.

Invoice Factoring

In the past few decades, new business finance options have opened up. Companies no longer have to depend on bank loans and traditional money lenders only. Business finance websites have exploded into the market in recent years. However, the concept of income factoring is an old one. It is only today it has started gaining attention. As early as the 1940s, companies used their account receivables to fund immediate cash flow needs. The difference now is that numerous factoring companies are available to choose from. An enterprise that wants to sell their invoices will not have a hard time finding a lending institution.

Role of Internet

Technology, particularly the internet has left an indelible mark in the world of business financing. A lot of the financing options available now are due to the convenience and flexibility of internet use.

Crowdfunding

Crowdfunding is financing option where you source for funds from people with an interest in your ideas. The method goes quite far back, but the 2000s is when the use of online platforms for crowdsourcing became a thing. A lot of people have completed donation campaigns successfully and funded their projects. Certain legal restrictions may arise when it comes to crowdfunding for business, but that depends on the region. Campaigns such as Indiegogo, Kickstarter and GoFundMe have given new meaning to crowdfunding.

Internet Lending

Another business finance alternative made possible by technology is online lending. Borrowing money from online lending institutions allows companies to have easy and fast access to cash when they need it. One reason online lending has grown in popularity is the less stringent requirements to apply for loans. An organisation without an impressive or long credit history can still manage to secure funds with online lenders. Online business can now benefit from services such as merchant cash advance.

The Future

Business finance has reached revolutionary levels, particularly with the new mechanisms of accessing cash, changes in global financial markets and varied funding sources. Looking at the future, the role of traditional banks will need reinventing as enterprises take on new faces. Peer-to-peer lending is expected to increase as well. Currently, a lot of investors are putting their personal wealth into SMEs, and that trend doesn’t seem to be dying anytime soon. The use of technology will lead to an increase in digital assets, meaning that lending institutions will have to deal with non-physical assets when lending to companies.