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.
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 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.
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
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
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
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.
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.