There’s been a revolution, people. Still happening. It’s in the world of lending, and it has to do with technology and automation. (Okay, yes, that revolution isn’t just happening in lending- it’s all over the place. But stay focused. Lending.) The fintech industry has exploded, and it provides a lot of good things – but automated lending isn’t a fit for every business and every situation.
This week on CEO Exclusive, I’m thrilled to welcome Ian Varley, CEO of Eagle Business Credit and his wife, head of marketing, Kris Varley. We talk about managing a company through growth, and keeping that small business feel as you cross over into the mid-market, and different solutions in lending (some of which still involve people).
Know What’s Out There
Fintech is a hot, catchall term that covers everything from the bank app on your phone, to cryptocurrency, to all manners of automated online lending. Basically, fintech is meant to apply technology to bring ease and improved function to financial activities.
Lending was among the first areas to be affected by fintech, with varying degrees of goodness. Some companies provide ease of application and algorithms that provide extremely low default rates – but fintech companies also are not regulated in the same way as banks, despite offering similar services, and, being computers and all, are not as intimately involved in the reality of what kind of financing your business needs.
That’s where fintouch comes in. Fintouch is a term coined by today’s guests to describe the human side of lending. While automated lending can be an excellent solution, it isn’t always what you need. Eagle Business Credit provides accounts receivable financing, also known as factoring. Factoring is one of the oldest forms of financing, and was even mentioned in the Hammurabi code. In factoring, you sell your invoices to another company. The money for your invoices is in your account by the end of the day, and they handle collections for you.
Be Clear on Who You Are and What Your Business Needs
It’s possible that you need a one-time cash infusion to move your business to the next level, and if that’s the case, automated financing is a great solution. It’s easy, fast, and reliable. It’s also a one and done deal. Accounts receivable financing allows you a continued line of credit and ongoing operating capital for your business. A lot of businesses fail, and often it’s due to lack of cash, plain and simple. Many small and mid-sized businesses can find themselves unable to pay employees if a 30-day invoice becomes a 60-day invoice, and this kind of financing alleviates that issues.
Eagle Business Credit knows their niche. Many business owners take out multiple loans and then find themselves stuck with just as many loan payments. With factoring, you get cash immediately and you have nothing to repay. Accounts receivable loan companies like Eagle also have a wealth of data, and may serve as advisors to help you avoid bad business deals.
Factoring is also less expensive than a lot of business loans. With automated loans, sometimes the ease is balanced by higher interest rates. The companies invest a lot into advertising (anyone with a mailbox can attest to that). When it comes time for a loan, make sure you do your due diligence and ensure that you’re getting the best deal.
The human approach can also be a more accessible approach. Says Kris, “You have a facility limit, but we can extend that. If you’re doing the sales to support it, there’s no reason why your line doesn’t grow with you. And we’re not going to say, your credit is not good enough…or you’ve only been in business for six months. We’re going to take the open approach.”
You Can Have the Best of Both Worlds
Fintech and fintouch aren’t two separate worlds. While companies like Eagle use less algorithm and more human, they still make things technologically accessible. You have a choice in the matter. You can apply entirely online, and there’s still a human who is knowledgeable about your business who you can reach out to in a pinch.
Ian says, “We use a lot of technology in what we’re doing; it’s changed remarkably over the last 30 years in factoring. And we love that part of it, but let’s have a human being as well. That way, we can really help those companies, and advise them.”
Today’s world is full of options, and navigating them can be a challenge. Lending is no different than other business needs. The more you know about your company, your needs, and what is available, the better your chance of success.