With 2018 coming to a close, it’s time to look at what 2019 has in store for small business lending. 2018 saw the rise of digital lenders and a shift in interest rates as the Federal Reserve began to adjust to the health of the economy, and 2019 promises to be another year of change. Here are 4 trends to be aware of for your commercial financing needs.
Traditional bank loans will be a major driver
We expect traditional banks are going to be a driving force in the market for many years to come. Banks are a reliable source for capital, with the ability to offer a wider variety of loans than many private financing sources. While alternative lenders might only offer a select number of loan types, or focus on non-traditional money lending types like hard money loans, banks have the cash reserves and resources to offer a vast array of loans.
This is good for you, as bank loans often have lower interest rates and can help you build business credit. An improved credit profile will help you with obtaining future loans, as well as helping you get better rates on your business credit cards and improving your access to real estate. Your broker will have established relationships with local banks, which can help make the process of easier for securing a traditional bank loan.
The Truth in Lending Act
The Truth in Lending Act is a new California law that goes into effect in 2019. It requires lenders to tell small business loan applicants the annualized rate they’d pay for financing. While not required in most states, the implementation of the law in California means it is more likely to spread to other states. Even if variants of the law take a while to pass into legislation elsewhere, many lenders will immediately update their lending practices at a corporate level so they can continue to do business in California.
According to the U.S. Department of Treasury, these changes will help protect you from inaccurate and unfair credit billing and credit card practices and ensure that you have more control over your business loan and its implementation. For more information visit the Treasury Department’s website.
Digital lending won’t be going away
The continued success of traditional banks won’t mean the end of digital lenders. With lenders like OnDeck and Kabbage continuing to grow in size, and giants like PayPal now offering business loans, the market will continue to grow. Even US Bank got involved with their own digital lending platform in 2018, which is why we expect more large banks to start offering smaller loans through online applications.
Additionally, the current market of digital lenders will improve their staple of products, including offering a greater variety of lending options. Their growth in popularity will continue to give them more capital and help them provide larger, more varied financing solutions.
This past year seems to have been all about artificial intelligence, with advancements in the field dominating the headlines weekly. That’s why we expect to see both traditional and digital lenders begin to implement A.I. in their lending process. Technology like A.I. can help businesses improve their speed and accuracy by improving their processing capabilities. For lending, this will result in an improvement in the speed of loan underwriting and approval, repayment schedules, and improved lender and lendee relationships. In addition, we may see lenders embracing blockchain and machine learning to improve their lending processes and their capacity for monitoring existing loans. This trend will only continue as the technology continues to improve, so expect to see A.I. usage grow throughout 2019 and into the future.
Commercial lending is a constantly changing market. The innovations of prior years continue to evolve and change today. Knowing what new trends and technologies will be prevalent in the coming year can help you prepare for the borrowing process and help your business start the year off right. Our brokers work to keep up to date with the latest trends and news. If you are looking for help in obtaining financing in 2019, contact us today.