Responding to loan requests with a simple “yes” or “no” is an outdated way of doing business in this digital world where relationships are more important than ever. By FINSYNC The lending landscape has changed drastically over the past decade, and banks that don’t adjust to the changes sweeping the industry may be in for some real challenges. Traditional bank loans are no longer the only option for small businesses in America, as the growth of online lending has given business owners a new avenue to secure financing. The Rise of Online Lending Back in 2015, the SBA reported, “A new generation of online lenders is surfacing with the promise of an efficient, streamlined application process with quick turnaround times and higher approval rates.” The report went on to note that borrowers spend a mere 30 to 60 minutes on online loan applications, which can be funded in a matter of days, whereas the traditional loan application process takes an average of 26 hours and may not be processed for weeks or even months. More recently, a 2018 report on small business lending in the U.S. detailed how a handful of the largest small business lending platforms are filling a financing gap for small business owners. NDP Analytics, an economic research firm based in Washington, D.C., reported that five online lending platforms alone funded $10 billion in online loans from 2015 to 2017, which generated $37.7 billion in gross output, creating 358,911 jobs and $12.6 billion in U.S. wages. Needless to say, we’re far from business as usual in the banking world when it comes to small business lending. The Opportunity of Online Data Access to online financial data streamlines both the loan application and approval processes, benefitting both lenders and borrowers alike. However, there are many more benefits to unlock in this newly charted territory. What if access to a business’s financial data could open up a dialogue between lender and borrower in a way that elevated the interaction from a mere transaction to an ongoing relationship? Along with the ease and access that online banking offers, small businesses in America are looking for more out of their lender than a simple “approved” or “rejected” response. Beyond “Yes” or “No” As we all know, a solid relationship is based on an ongoing dialogue rather than a communication dead end. What’s true in life is most certainly the case in banking. For far too long, the conversation between lenders and their clients has ended with, “No, I cannot help you with financing.” What if the conversation — and relationship — could continue, even when a bank opts not to finance the loan? The payoff, of course, is a long-term relationship and all of the future business that comes along with it. Banks and credit unions in FINSYNC’s Lending Network are given three options every time they receive a loan application to review:
- First, the member bank can assess the financial data provided by FINSYNC and opt to approve the loan for their own balance sheet.
- If the bank determines that the business isn’t quite ready for traditional bank financing, the lender can seamlessly share the application with another member lender that’s prepared to approve and fund the loan on behalf of the bank.
- If the bank determines that the business is not ready for financing at the present time, they can show the business how to get where they need to be. As part of FINSYNC’s cash flow management solution, the bank can communicate milestones and actionable steps that the applicant can take to qualify for financing in the future.
What would happen if Amazon were to get into the banking business? By Tucker Mathis, CEO, FINSYNC, Inc. FINSYNC is rapidly building a network of banks that use our technology to connect with customers in search of financing online. As a “fintech” company, we are often asked about other technology companies and their potential impact on the banking industry, should they elect to throw their hat (or weight) into the ring. Most commonly — Amazon. Uniquely enough, I love the question because it teases out something I am very passionate about, and that’s the desire to be in the relationship business (as opposed to transactional). If banks want to build a defensible competitive advantage over Amazon banking, they too will need to move to the mindset of being in the relationship business. This may sound obvious, but it’s not. I meet with bankers all the time that speak of a desire to innovate, then describe the box their idea needs to fit within and the areas where it cannot overlap. If only I could walk into my next bank board meeting with Clay Christensen, who authored The Innovator’s Dilemma. He has a message in that book that everyone in the banking industry should stop and read, if they haven’t done so already. If I had to summarize it in one sentence: Innovating in fear of staying within a box, or a previous product, process or price — isn’t innovating. For a bank to truly be in the relationship business, they, like Amazon, have to innovate and always iterate in an effort to earn the customer’s business and loyalty long term. For most banks, this requires a change in mindset and a willingness to adopt new technology and processes. All of this can be overwhelming for a bank. I recently attended a bank conference where the bankers were outnumbered almost three to two. That is, there were three vendors for every two bankers at the conference. In this kind of environment, how does a bank decide with whom to innovate? Or, to partner or to build? Building is very expensive and risky and should only be considered by very large, well-capitalized banks. For the other 4,000-plus banks and 6,000-plus credit unions, I can help make your job easy. Think about your customer first. Look for and then adopt the solutions on the market that are proving to create the most value for your customers while also helping your financial institution to increase revenue, reduce risk and improve the overall relationship you have with your customers. If your customers win, you will win irrespective of who enters the market. FINSYNC makes it easy for you to connect with your customers online in order to strengthen these all-important relationships, and ultimately fund more loans. Joining FINSYNC’s Lending Network allows you to offer your customers an online financing option that goes beyond traditional lending — and requires no IT investment or implementation on your end. When you’re not ready to approve a loan, FINSYNC helps you continue the relationship by presenting the business with actionable steps they can take to secure financing with you in the future. We also help businesses with advanced cash flow analytics and projections that allow them to show you exactly where their business is going. It’s a value-add for both you and your customers, and it all begins with your relationship.
ORIGINALLY PUBLISHED ON BUSINESSWIRE HERE FINSYNC is Rapidly Closing the Gap Between Online Banking and Online Lending FINSYNC expects to have over 2,000 banks in its lending network within 24 months. ATLANTA, GA - February 28, 2019, FINSYNC, Inc., a cash flow management platform for small to midsize businesses, is adding new banks to its lending network at an accelerated rate. FINSYNC makes it easy for the businesses who use the platform for cash flow management or modeling to connect with banks, credit unions and lenders online for quicker access to capital. “Businesses who apply for financing through FINSYNC can now request their current bank be added to the FINSYNC Lending Network, in the event the bank is not already a listed member. Since introducing this new capability, a new bank has been added every day, and we see this number climbing quite sharply for many reasons,” says Tucker Mathis, CEO of FINSYNC, Inc. Why Banks are Flocking to FINSYNC’s Lending Network
- According to a recent FDIC report, approximately 80% of banks currently do not offer their business customers the ability to apply for financing online in any form. Tucker adds, “An even greater percentage share with us that they don’t feel equipped to efficiently and effectively underwrite loans below $500,000.”
- FINSYNC solves some very specific problems that are resonating with business owners, including the ability to apply for financing with their bank online, and getting credit for where their business has been and where it’s going. When applying for financing through FINSYNC, the business syncs their bank account, which allows FINSYNC to help business owners understand their loan options based on actual cash flow and assumptions about the future.
- When businesses apply for financing from their bank through FINSYNC, the bank benefits from advanced analytics that include projected cash flow and tools that can help a business illustrate where it believes it is going.
- In addition to advanced analytics, member banks benefit from seeing alternative loan options that are available through a network of lenders. The member bank can present the best loan option to their business customer alone or in partnership with any other member lender that’s part of the network.
Free up time to focus on mission critical areas by putting administrative tasks on autopilot with intuitive online tools that can do the heavy lifting for you. By FINSYNC Running a small business can make you feel like you’re stuck in a circus-juggling act. It’s difficult enough to keep the doors open and make sure your employees get paid without the added pressure of tracking your cash flow and keeping your books. It can seem near impossible to find the time or energy to harness the passion that got you into business in the first place, much less focus on sales, customer service and other areas that require your immediate attention. Financial management shouldn’t feel like a full-time job. There’s no better time than right now to get a handle on overwhelming administrative tasks so you can get back to the heart of your business. FINSYNC is here to help: We’ve got three intuitive tools to help you win the battle against runaway financial management once and for all. Automate Your Accounting Are you tired of spending endless hours filling in spreadsheets? Is your budget a little too tight to hire a full-time bookkeeper? We hear you. Fortunately, there’s an easier — and less expensive — way to get a handle on your accounting. In a word: automate. It’s never been easier to sync up your finances with a sophisticated online tool that can take care of your accounting automatically. Simply import your bank transactions, and they’ll be automatically categorized for you on a complete general ledger. Easily track your expenses, tackle month-end reconciliation, and prepare your taxes in a fraction of the time. You can also generate reports that make it simple to drill down to the details you need. Bottom line? Automating your accounting is a shortcut to actionable insights that can help you make better business decisions. Invoice on Autopilot Are you still spending time writing checks, preparing invoices and mailing all of the above? What if you could pay vendors or collect payment for your goods and services with the click of a button? It’s that easy with invoicing software that can save you hours on administrative tasks. Set up recurring invoice schedules and auto payments to shrink your to-do list, and skip those excruciating calls to overdue clients with alerts that automatically remind customers when payments are due — or past due. Invoicing on autopilot saves ample time and makes it easier for you to both collect and make payments. The benefits extend to your clients by making it easier for them to pay you, which can help you get paid faster and keep your cash flow solidly in the green. Simplify Cash Flow Management You know how important it is to monitor your cash flow, but somehow keeping track of the money that flows in and out of your business can seem like an overwhelming task. What if we told you that cash flow management doesn’t have to be difficult? Beyond helping you get a handle on your current cash flow, intuitive online tools can make it easy to spot trends and plan for the future with automatic projections based on your history. Once you can see where your cash flow is going, it’s easy to make adjustments and schedule payments to avoid a dreaded shortfall that can put you in the red. Visualize your past, present and future with the help of automatically generated charts and graphs that give you a picture of your cash flow that’s easy to comprehend — and act upon. The Power of Consolidation How many different apps, passwords and software systems does it take to run your business? If you’re still keeping track of a slew of disparate systems to handle various financial management tasks, consider improving your efficiency by consolidating your efforts onto one system. When you sync your finances on FINSYNC’s platform, you get access to all of the tools you need to automate your accounting, invoice on autopilot and easily analyze your cash flow. In other words, you can automate your back office from a single platform with one password. Simplify your financial management to save time, get more mileage out of your resources, and maybe even get back to all of those things that inspired you to build your business in the first place.
By FINSYNC Getting rejected for a small business loan is practically a rite of passage for entrepreneurs. Rejection rates can be as high as 73 percent with traditional banks. The odds improve a bit with alternative lenders, who generally approve around 57 percent of small business loan applications, but the rejection rates can be disheartening. Ready for some good news? Lenders reject loan applications for the same often-avoidable issues over and over. When applying for a loan, it helps to think like a lender. Consider five common reasons small business loan applications are frequently denied, and take steps to avoid these common pitfalls.
- Not Enough Time in Business
- Asking for Too Much, or Too Little
- Poor Credit
- Weak Cash Flow
- Lack of Planning
When you need working capital without delay, borrowing against your unpaid invoices is a short-term cash flow solution worth considering. By FINSYNC Waiting 30, 60 or even 90 days to collect on goods and services rendered is challenging enough for small businesses, without the added stress of late payments. Unfortunately, delayed payments are all too common, with one in every 10 invoices paid late. While there are several steps you can take to get paid faster, sometimes your business needs the funds you’re owed right away. So what can you do when you need working capital for immediate expenses, and can’t wait to collect on unpaid invoices? Enter invoice financing, also known as accounts receivable financing. This type of loan allows you to borrow money against the amount your customers owe you. In other words, you can finance your unpaid invoices to get the cash you’re due now — without having to wait for your customer to make the payment. How It Works When you finance an unpaid invoice, you’re essentially getting a cash advance on the invoice, which serves as collateral. So what does this convenience cost you? You’ll pay the lender a percentage of the invoice in return for the loan. Lenders generally advance around 85 percent of your invoice right away, and you’re paid the remaining 15 percent once your customer pays their invoice. There’s often a processing fee, plus a percentage that’s generally calculated on a weekly basis (somewhere around 1 percent per month). The longer it takes your customers to pay their invoice, the more interest you’ll pay. When to Consider Invoice Financing Invoice financing offers a short-term solution to cash flow issues. It’s an option to consider when you need cash immediately, and can’t afford to wait for your customers to pay their invoices. This type of financing often makes sense for companies that face long payment cycles, or for seasonal business swings. Whether you need funds to cover operating costs, pay your employees or support a growth opportunity, invoice financing is a fast, convenient way to access cash. How fast? Many accounts receivable loans are processed in as little as a day, and with FINSYNC you can turn your invoices into cash in just one click. Beyond the speed and simplicity with which you can access funds, invoice financing is worth considering for startups and businesses that may have a difficult time securing other types of loans. With invoice financing, your customer’s credit score is given more weight than your own. In stark contrast to the approval process for traditional small business loans, accounts receivable lenders are looking mainly for unencumbered accounts receivable from clients with good credit. Your own credit history, cash flow and business outlook are secondary. Advantages of Invoice Financing Invoice financing offers many advantages, several of which we’ve already mentioned. They can be easier to qualify for than other types of loans, you get funds fast and approval is generally based on your customer’s credit rather than your own. Startups with a limited history often have an easier time qualifying for invoice financing, as there’s less emphasis on cash flow and revenue. Generally, three to six months of business history is sufficient, and the only collateral you’ll need is the invoice itself. The other obvious advantage is the time you’ll save waiting for payments. Getting the money you’re owed immediately can help you avoid cash flow issues and may even help you take advantage of timely growth opportunities. Other Factors to Consider When you factor an invoice, your client is usually notified — which can be uncomfortable for both you and your client. With FINSYNC’s invoice financing, your customer will never be informed about the transaction, as we are also a payment processor. Invoice financing can be more expensive than other types of loans. The rates and fees tend to be higher in return for fast, easy access to cash. They can also be somewhat unpredictable, as the fees are based on the time it takes for the invoice to be paid. Repayment terms are often shorter for invoice financing, generally around 12 weeks. And don’t forget that you’re still dependent upon your customer’s payment; if they don’t pay you, it’s still your responsibility to pay back the loan. Keep costs down and minimize your risk by repaying the loan quickly, and only finance invoices from clients with a solid repayment history.
From tightening payment terms to making it easier for customers to pay you, follow these five simple steps to speed up payment and protect your positive cash flow. By FINSYNC Cash flow is the lifeblood of any small business, as you no doubt are well aware. How else are you going to cover expenses, pay employees and keep things running — not to mention qualify for financing when you need it? Needless to say, overdue payments can put a serious kink in your cash flow. More than 80 percent of small business invoices in America are over 30 days past due. Not only that, the average small business is buried under more than $80,000 of unpaid invoices. And while late payments can cripple a small business, there are several steps you can take to bypass this common problem. Getting paid in a timely, reliable manner is one of the best ways to bolster your cash flow. We know what you’re thinking: easier said than done. Follow these five simple strategies to get paid faster in order to maintain a positive cash flow.
- Invoice Immediately
- Shorten Your Payment Terms
- Provide Incentives
- Offer Flexible Payment Options
- Automate with Invoicing Software
Boost your chances of getting approved for a small business loan and limit your liability by building up your business credit. By FINSYNC Are you still using personal accounts to run your small business? Separating your personal and business finances is a good idea for many reasons. For one, you don’t want your personal assets on the hook if your business falls on hard times (read: bankruptcy or a lawsuit). Do You Need Business Credit? While building business credit takes time, there are several benefits that are well worth the effort. Not only will you protect your personal credit and limit your risk, business credit can also help you get approved for a larger small business loan at a lower interest rate. With business credit, you’re also less likely to be asked for a personal guarantee. If you’re applying for a small business loan from a commercial bank or an SBA loan, you’ll need business credit. Online lenders are often more lenient when it comes to credit scores, and pay closer attention to cash flow as an indicator of your creditworthiness. Let’s not forget about personal credit. Most lenders will pull your personal credit — especially when they ask for a personal guarantee, or your business is new and you have yet to establish business credit. An excellent personal credit score will boost your chances of getting approved for a small business loan, while less-than-stellar credit can be a red flag for lenders. How to Establish Business Credit If you haven’t already done so, establishing a business entity that’s completely separate from your personal finances is the first step. If you’re currently operating as a sole proprietorship or general partnership, you’ll need to incorporate or form an LLC. Corporations and LLCs file their own tax returns and have a credit score that’s completely separate from your own. To incorporate, you’ll need to apply for a Federal Tax Identification Number (EIN), which is essentially like a social security number for your business. Be sure to open a business checking account in your legal business name and use it to pay a credit card that’s also in your business name — neither should be tied to your personal accounts. It’s also important to set up a business phone line in the name of your corporation, and get it listed in the 411 directory. Not only will this allow suppliers and lenders to verify your business during underwriting, it gives you an opportunity to build your credit history and boost your rating by paying your phone bill on time. Put any utilities in your business name as well for the same reason. You’ll also need to get registered with the business credit bureaus. Get a DUNS number from Dun and Bradstreet and register with business credit bureaus like Experian and Equifax. How to Build Business Credit Now that you’ve established your business credit, it’s time to build it up by applying for credit. Vendors and suppliers are an ideal place to start. Financing regular purchases, such as office supplies, coffee and marketing materials, is one of the most efficient ways to build your business credit. Secure a line of credit or negotiate payment terms from net-30 to net-60 days, and always pay your invoices on time. While on-time payments seem obvious, it’s worth noting that a late payment can impact your business credit score for as long as seven years. Once you establish a good relationship with your vendors, you can work your way up to revolving credit lines. Note that not all vendors report to credit bureaus, so check your credit reports and make sure to open accounts with a few vendors that report to a variety of commercial credit reporting agencies. Keep an Eye on Your Credit Report Errors on business credit reports are somewhat common, and can lower your credit rating. It pays to monitor your business credit reports with various agencies regularly so you can report any errors and have them corrected. Remember to be patient. The longer your credit history, the higher your rating. What’s the fastest way to build your business credit? Once you’ve established accounts with vendors that report to the business credit bureaus, pay your bills on time, in full. The reward is worth the wait: You’ll have greater access to funding and save money with lower interest rates.
Need a Small Business Loan? Start thinking like a lender to boost your chances of success. Hint: Cash flow is king. By FINSYNC Ever been denied for a small business loan? You’re not alone. Rejection rates among online lenders and commercial banks range from 43 to 73 percent, depending on the lender and their appetite for risk. Perhaps you’ve been rejected without any guidance about what you can do to get approved. This is not uncommon. Nearly 25 percent of applicants denied for a loan report they have no idea why they were rejected. So what can you do to increase your chances of getting approved for a small business loan? Think like a lender and learn what they’re looking for. At their core, lenders are risk managers. When assessing your loan application, they’re measuring the level of risk associated with your ability to repay the loan based on the information you provide. Most lenders were taught to underwrite loans based on the “5 Cs” of credit: cash flow, cash balances, collateral, credit and character. Cash Flow The cash flow of your business is the single best indicator of your company’s ability to repay the principal amount of your loan plus interest within an agreed upon timeframe. Lenders want to see a solid history of net cash flow that can clearly satisfy the loan you’re applying for. Net cash flow is simply the amount of cash that’s available after you’ve paid all of your outstanding business expenses. From a loan approval standpoint, the operative words are “satisfactory history.” Some lenders want to see 12 to 24 months worth of history. Lenders who are willing to assume more risk will rely on just 90 days worth of bank transactions, which can often be verified online; this can lead to quicker decisions through advanced automation. Cash Balances In addition to positive cash flow, lenders want to see a history of your ability to maintain a positive bank balance. Ideally, they want to see a balance that’s increasing, which is evidence that you’re growing and getting good at managing cash flow. This is especially important if your business is subject to market swings or other dynamics that can lead to less predictable cash flow. Collateral (Use of Funds) Depending on the strength of your cash flow and cash balances, along with your business profile, lenders may want to know what you’ll be using the loan for. Investing in assets that increase sales and strengthen cash flow can be a compensating factor for weaker historical cash flow and balances. Depending on your operating history and cash flow, a lender may require an actual assessment of collateral prior to loan approval. This is especially true if you’re offering assets that appreciate, such as real estate. Assets that depreciate quickly, like equipment and inventory, won’t do much to strengthen your loan application. With this type of collateral, the lender will focus more on the cash flow of your business. Credit & Character (Business Profile) When it comes to lending decisions, your business profile is important. Most lenders require that you’ve been in business at least a year, though some will make an exception for younger companies if your business is getting traction and showing strong revenue growth. When assessing the credit and character of your business, lenders will also consider the industry you operate in, makeup of customers, history with vendors, and online reputation. Businesses operating in industries that are subject to market swings and scrutiny are considered higher risk than those with more predictable patterns and favorable coverage. A growing, diverse customer base with repeat customers represents less risk than a business with nascent revenue and no repeat customers. Lenders want to see a positive payment history with your vendors, as it leads them to believe they can expect the same from you. Likewise, if they see a negative history, they will be concerned the same will happen with them. Not many vendors report to the business credit report bureaus — be mindful of the ones that do. Good online reviews from customers and employees can strengthen your application, especially when you plan to use the funds to serve more customers and keep your team happy and growing. Your Future The “5 Cs” is a traditional assessment of credit based on where your business has been, but thankfully a growing number of lenders are using new technology to analyze where your business is going. This is good news, as it can help more businesses qualify for financing. While traditional lenders tend to make decisions based solely on your past cash flow, more lenders are starting to take future cash flow projections into account. Cash flow projections are an opportunity to show these lenders where you expect to be with the help of their funds, which may tip the scales in your favor. Consider this: If your current cash flow doesn’t support the loan repayment schedule for the amount you want to borrow, you’ll need to show the lender how your business will get to a place where you can comfortably make those payments. To be clear, we’re not saying that lenders are turning into venture investors. An operating history with positive cash flow will always be the most important factor for lenders. However, this new model allows you to combine a positive history with plausible projections to build credibility in the eyes of lenders so you can obtain the capital you’re looking for. Tools to Help In order to boost your chances of qualifying for a small business loan, your best bet is to start looking at your cash flow through the eyes of a lender. Getting a handle on your current cash flow and making future projections doesn’t have to be difficult. FINSYNC’s intuitive online tools can help you easily visualize, manage and project your company’s cash flow so you can gain insights that will optimize your chances of getting the best financing to grow your business. FINSYNC has a growing network of lenders who rely on its technology to make quick or automated decisions based on your past, present and projected cash flow. As your cash flow improves, your access to additional capital grows with you.