Lending Trends 2024: A Q&A with Finder

It should come as no surprise to anyone that lenders need to be more agile now than ever before. 

Fortunately, new technologies like AI, ML, and blockchain are playing increasingly prevalent roles in helping lenders achieve this agility. Meanwhile, ongoing digital transformations at lending organisations are speeding up credit decision-making processes.

As these trends only continue to grow in relevance within the lending space, understanding how they impact lending operations, customer experiences, and the industry at large is vital. 

Speaking with Finder’s Business Finance Expert Michelle Stevens and Funding Options by Tide’s Senior Business Finance Specialist Drew Johnston, we set out to uncover the truth about the key trends influencing the lending industry today. 

The impact of digital transformation on business borrowers 

More and more, we are witnessing a shift to digital and platform-based lending that adds new convenience for business borrowers. By 2030, the global market for digital lending platforms is expected to reach US$58.6 billion, growing at a rate of 8.4%.

Let’s begin by examining how digital transformation impacts business lending: 

Question: In what ways is digital transformation impacting the user experience for businesses applying for loans? Can you discuss any innovative digital platforms or tools that are expected to reshape the business lending process in the coming years?

Michelle Stevens: As with many areas of financial services, new technology has transformed the online application process for businesses applying for loans. The user experience is more streamlined, and forms are becoming easier and quicker to fill out with pre-populated personal and financial data. From the lenders’ side, end-to-end tracking enables them to monitor drop-off rates during the application process and improve the digital application process for end users.

AI-generated tools are also now allowing lenders to perform enhanced risk assessments, while Open Banking technology is already being used for checking creditworthiness and tailoring loan rates. These types of digital tools mean borrowers can often be verified without having to upload separate documentation or go into a bank branch, for example.

Drew Johnston: As technology tends, the digital transformation has expedited the process when it comes to making a credit decision. Not too long ago, a business owner or director would have to post their financial documents or go directly into the bank with their supporting documents to complete an application which would take them a number of weeks to come back with a ‘decline or approved’ answer. Now, with commercial finance platforms, such as Funding Options By Tide,  a user can simply log on to the internet, plug in a few points of data and through prior machine learning, they can be matched with an appropriate lender(s). However, to speed up the decision process and get to the point of an approved offer, the business owner or director may choose to connect to their bank account via an open banking link providing a lender with read only access to analyse real-time data to make informed decisions and provide the borrower with a quick decision. The tech space in business lending continues to evolve. We will start to see more lenders and commercial lenders start to use open banking and open accounting to analyse real-time data as part of standard practice. In fact we are already seeing both lenders and intermediaries making this leap to speed up the real-time decision process for business and enabling the lenders and intermediates to handle great volumes.

Personalisation leads the way in business lending

To provide borrowers with a seamless lending journey, ensuring speed and ease in the lending process is key. Yet, speed and ease must not come at the cost of the human touch — lenders must find ways to increase their digital efficiency while still providing business borrowers with tailored loan offers. 

One Finder report revealed that SMEs apply for external finance for three main reasons — to increase working capital, to invest in business growth, and to purchase fixed assets. 

Helping businesses meet these needs requires a personalised approach to business lending.  

Question: How are fintech companies working towards personalising the business lending experience for different types of businesses? What trends are emerging in customer-centric approaches to business lending, and how do they contribute to customer satisfaction and loyalty?

Michelle Stevens: The application process plays an important part in generating customer satisfaction, and it’s often a borrower’s first point of contact with a lender. Ideally, providers want applicants to feel valued from the get-go – customers like to be shown a personalised and easy-to-use interface that offers an answer quickly. Lenders should consider whether the application form can offer pre-filled data, and whether there is online advice available during the application process (such as a chatbot or live chat). The loan rates on offer should be transparent, as well as indicating what the chance of approval is, to avoid potential customer frustration. Personalised follow-up communications can also make the customer feel more valued.

Business lenders are often now providing more than just the option of a secured or unsecured loan; they also have alternative finance types available, such as asset finance, hire purchase or invoice finance. Some fintech companies also offer add-ons such as integrated business software – for example, expense management systems or cash flow insights. 

We’re also seeing some companies in the industry becoming a hybrid between a direct lender and a broker. By offering broker services, business customers can assess more loan deals and gain a better understanding of all the products on the market. By seeing tailored rates and having a more holistic view of the loans they may be eligible for, business applicants can also maximise their chance of approval.

Drew Johnston: Fintech companies always strive to make the journey as seamless as possible for the customer, I mean, you just have to speak to our product team who are always working towards enhancing the customer's journey. I think the trends that are starting to emerge are speed and ease. However, there still needs to be an element of human touch. All too often, business owners speak of the frustration of not being able to speak directly with their Relationship Manager at the bank and then will turn to an intermediary such as us, because, one – they will be able to get a response quickly, and two – they have the option to speak to a human. It’s a fine balance between speed and still having human intervention during the process.

Navigating the evolving landscape of business lending in 2024

Question: What advice would you give to businesses looking to navigate the evolving landscape of business lending in 2024? Are there specific strategies or preparations businesses should consider to secure financing more effectively in the changing financial environment?

Michelle Stevens: Before applying for a loan, businesses should make sure their day-to-day finances and financial documentation are in good shape, and potentially look to build their credit score. In a changing economic environment it’s also becoming increasingly important for businesses to compare loan rates when looking for the best deal for them. After a long period of a low and static base rate in the UK, the Bank of England has been changing the base rate more frequently in the last couple of years, and this has a real impact on loan rates in the wider market. Businesses should take into account how much the loan is going to cost them over the whole borrowing term, and consider whether they want to go for a fixed rate rather than a variable or hybrid rate. This is especially important for startups who might not have a positive cash flow yet.

Drew Johnston: The world of business lending can be a web of jargon and an ever changing landscape of product offerings and sleek and slender new offerings that can sometimes be overwhelming when you are still trying to run a business in a tough micro and macro economic climate. My advice would be to be more proactive instead of being reactive when it comes to business funding which is sometimes easier said than done. Predicting when there will be pinches in cashflow or when you have a new project on the horizon. Debt or funding depending on your risk appetite can be a great tool to leverage your business growth. Finally, it’s always worthwhile speaking to an expert, sometimes we will often receive requests for a loan when in fact there could be other financial products that a business owner may not be aware of that may be suited to their business.

Discover your funding options as a business borrower

At Funding Options by Tide, we help you find the ideal business loans for your needs. 

With our team’s expert support and free application, you can get matched with more than 120 lenders for loans from £1000 up to £20M without impacting your credit score. 

Get started with Funding Options by Tide today. 

Please note that the information above is not intended to be financial advice. You should seek independent financial advice before making any decisions about your financial future.

It’s important to remember that all loans and credit agreements come with risks. These risks include non-payment and late-payment of the agreed repayment plan, which could affect your business credit score and impact your ability to find future funding. Always read the terms and conditions of every loan or credit agreement before you proceed. Contact us for support if you ever face difficulties making your repayments.