Getting a Business Loan with a Neobank

For many financial institutions, including traditional financial institutions, the focus is on SME lending. The process of risk assessment for SME loans is time-consuming and complex. Identifying SMEs with reliable credit history and good repayment behaviours is complicated.

It has led to a gap where small businesses' inability to secure loans whenever they need it most. The relationships between traditional banks and SMEs have been strained for some time now. 

Due to this, it created gaps in the financial industry which is now rapidly filled by neobanks backed by fintech companies who can provide SMEs with small business loans with flexible repayment schedules and affordable interest rates. It is the kind of alternative financing and startup funding that SMEs can count on to provide better control and structure to their cash flow. 

Neobanks Are Not New

The consumer banking industry was somewhat jolted and then revolutionised during the pandemic. Even before that, with the emergence of these challenger banking platforms with no physical branches, neobanks have been on the rise in other parts of the world.

It's been around in developed nations like Europe and the United States since approximately 2013. 

Neobanks' approach is customer-centric, focused on flagship products with great USPs, and thrives on strategic partnerships. 

As popular of neobanks continue to evolve in Europe and the United States, other regions like India, China, Southeast Asia, and Brazil is quickly taking shape. It's been growing over the years, although consumers are generally unsure about what neobanks are at the point of writing. 

In the nutshell, neobanking is simply a new way of managing a company's finances, breaking free from the brick and mortar model. 

It's, therefore, not a surprise that there's been a quick pickup over the past five years for neobanks.

The predictions are that the industry will continue to grow by some 30% for the next five years. The forecast is not without evidence. With digital transformation taking place in companies all over the world, after the pandemic, it is a natural transition. 

The market is expected to continue growing by at least 25-30% in the next five years.

How Will Neobanks Help SMEs?

Neobanks exist primarily only in the digital space. Banking on that, they're regarded as the faster, more efficient, more complete, straightforward, adaptable, and cost-effective alternative for small businesses looking for loans and startup funding.

Neobanks are also ever-evolving. Often looking at community-based and local needs, neobanks are fast to pivot.  

The application, approval, and disbursement processes are also attractive neobank elements. For popular business loans like short-term business loans, the process is noticeably easier and faster. 

Different neobanks, however, have different focuses. While some may focus on providing mainly small business loans, others go beyond the norm by helping SMEs manage their finances, team spends, budgeting, and reporting online via webapps and mobile apps. 

Because of its flexibility and adaptability, rising neobanks in Singapore and Malaysia are doing the same but with different focuses. 

For instance, INFT offers a whole suite of financial management and funding tools under one app. In Malaysia, INFT focuses on affordable small business loans. 

As you can see, neobanks' adaptability is customised towards the country’s or community's needs. Smaller financial institutions also offer tailor-made financial solutions that help SMEs create a digital credit history. 

Getting a Small Business Loan from a Neobank

Applying for, getting approval, and securing the funding you need for your small business growth with a neobank is faster and easier. 

Traditional banks may feel that small businesses lack solid credit ratings required for loan approvals; this is coupled with the fact that some small businesses may have sought business loans from informal sources in the past or at the time of application. 

Although getting a business loan from a neobank is faster, more flexible, and has fewer red tapes, there are procedures neobanks look at before loan approvals. 

What’s really important to neobanks is helping the community that it serves. For example, B2B businesses have been facing some of the biggest challenges even before the pandemic hit. It definitely needs to evolve as fast as its B2C counterpart can. Neobanks have stepped up efforts to help bridge the gap between businesses with intuitive platforms.

Easier, Faster Loan Approvals

The type of documents and history neobanks look at are basic business information for verification purposes.

The verification process is also much faster compared to conventional banks. Requiring no collateral and only a few years or months of active monthly transactions, fintech companies have noted the upward trend. 

A major roadblock for small businesses seeking out funding and financial help from traditional banks is that they may lack collaterals, do not have proper accounting systems or documentation. 

Are neobanks able to replace conventional banks? It is highly unlikely, at this point.

However, many industry experts believe that banks and neobanks have complementary products and services that can essentially provide a fully complete financial services package for big and small companies alike.

Before You Go…

INFT offers a whole range of financial services and online tools that can help you get funding for your business, manage your accounts, budgeting, team spend, and even issue virtual corporate VISA cards to your employees for company expenditure. 

Signing up is seamless and easy! Just sign up for a free business account with us right now to get started. If you have questions about our suite of services, we are ready to help. Reach out to us at cs@inft.co or (+65) 6635 5668 and we will be happy to assist you.