LONDON--(BUSINESS WIRE)--Technavio analysts forecast the global online financing platform for SMBS market to grow at a CAGR of more than 53% during the forecast period, according to their latest report.
The research study covers the present scenario and growth prospects of the global online financing platform for SMBS market for 2016-2020. The report also lists commercial buildings, residential buildings, and automotive as the three major segments where the use of solar control glass is used the most.
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Technavio analysts highlight the following three factors that are contributing to the growth of the global online financing platform for SMBS market:
- Increase in lending to SMBs
- Borrowers having quicker access to credit
- Proper management of inventory system and working capital
Increase in lending to SMBs
In the aftermath of the financial crisis, banking, and financial institutions are trying to deleverage the off-balance sheet items to meet the penal capital adequacy requirements. This has led to the reduction of loan finance for SMBs and individual borrowers as they are considered to be risky. According to Amit Sharma, a lead analyst at Technavio, “The emerging models of the online lending sector that includes an online balance sheet, marketplaces, and P2P platforms has successfully filled a massive unmet need. The innovations in technology have expanded the ease of access to working capital for SMBs.”
The boundaries of technological services are sometimes fluid, but there are five key products required for funding small businesses. These include marketplace lending, merchant and e-commerce finance, invoice financing, supply chain financing, and trade financing. The top vendors in the market are making huge investments in research and development to formulate different strategies in product structuring that would help in addressing the credit gaps in the SMBs financing. Many innovations like equipment lease finance would help in meeting the debt obligations. Studies show that a company opts for different models of online lending services when it faces an acute cash shortage, which is caused due to delayed payment by debtors, thereby resulting in a liquidity problem. It is also evident that SMBs use these services during their start-up and growth stages because during these phases the companies find it difficult to raise finance due to lack of data about their performance histories. The availability of such alternative finance can reduce SMBs dependence on bank lending.
Borrowers having quicker access to credit
If we look at the current market scenario, the online lending platform provides credit to the marginalized borrowers like SMBs that are unable to obtain capital from the other banking and financial institutions. The SMBs lack high-quality collateral and long credit histories and are associated with higher risks.
The online lending platforms offer risks, along with scenario analytics for different products and services with real-time pricing and capital management of multi-asset portfolios. This unique tool would provide a transparent and detailed solution to clients to buy the products and services from the online platform. The online lender's professionals that deal with the online platform use credit data and deal with information to generate cash flows and analytics at the portfolio level. This practical process of pricing the products and solutions should help manage individual portfolios and avoid firm-wide risks through consistency, automation, and transparency.
Proper management of inventory system and working capital
Inventory management has improved in the last five years and has enhanced cash flow and the way working capital is managed. Inventory is crucial to any company’s balance sheet. For instance, if a company needs to prevent losses then it has to ensure enough inventory to meet demands. Therefore, organizations must focus on maintaining optimal inventory levels by setting up a system that uses various internal processes to track accurately and maintain inventory. Such a system will enable a company to manage the vendors and customers. It will also help to monitor demand patterns, track inventory performance, maintain accurate inventory counts, and ensure that suppliers adhere to their commitments during the forecast period.
The tech-based alternative lenders include companies like OnDeck and Kabbage that are popularly known as online balance sheet lenders. These platforms provide short-term loans that require less than nine months to fund the working capital and inventory purchases. These loans operate like those of the merchant cash advance with a fixed amount or a percentage of sales (that is deducted daily from the borrowers' bank account over several months).
“Globally companies are trying to set up sophisticated liquidity management structures, which would assist them in reducing the working capital gap, and increase the scope of profitability amongst the large corporate and SMBs. Therefore, online lending models, which is used as a tool, facilitates the growth of new business,” says Amit.
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