What are financial challenges?
With reference to the future of finance in small business, financial challenges generally implicate –
- Improper and discordant cash flow
- Not enough money in the bank for working capital
- Delayed bill payments
- Unorganized book-keeping
- Inability to project expenditures and revenues appropriately
Small businesses have come up rapidly in the last decade of industrialization and capitalism. However, these businesses mostly depend on financial assistance from several sources to make larger investments in order to nurture themselves. However, the future of finance in such business still looks very bleak and unsure.
The major challenge for the future of finance in small business is the limitation in financial assistance from the large financial institutions and banks. Such financial institutions are mostly built to service the large scale industries. Their evaluation model mostly accesses the creditworthiness of large businesses using several tools and score which is apt for such large businesses. However, when such institutions try funding small businesses they try to assess the creditworthiness of the borrower by fitting their small businesses into the credit models of the large ones. This creates a huge ambiguity and hence reduces the credibility of the small businesses.
Financial Opportunities for Small Businesses
Options which guide the future of finance in small business would mostly include several other forms of funding options like –
- Online Lending
- Invoice factoring
- Online Banking
- Online Lending – This is a more versatile and compact way for the future of finance in small business. Such online lending firms work in a similar way to banks but have a much easier and accessible funding approval system. These funding options mostly use an online interface and require comparatively much lesser stringent requirements for revenue, tenure and credit rating as compared to traditional lending institutions like banks. Hence small businesses find it much easier for taking funds from online funding with less collateral than the banks.
- Crowdfunding – This innovative method in the future of finance in small business has mostly based the power of such businesses to convince people to invest a share of their income into specific business, products or services and campaigns. The return on such investments is mostly via a share of profit or via kind where the particular product or service is offered for free to the investors
- Invoice Factoring – This particular method in the future of finance in small business is mainly based on shared credits. Individuals have the ability to purchase several pending invoices and make those payments on behalf of the small businesses at much-reduced rates.
- Online Banking – Banking sectors have revolutionized their methods with the introduction of online banking. This future of finance in small business allows them to keep tabs of their incoming revenues, pending bills and credit statements over a period of time without even being physically present at the bank. This increases the accessibility of several financial services from the banks with just one click.
Thus, the future of finance in small business seems a lot more secure than as it was earlier with the introduction of such reliable sources of funding.