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How to Keep Your 2018 Small Business Financial Resolutions

It happens every year. When January 1 comes, business owners examine what happened during the past 12 months and decide to start anew by making business financial resolutions. Resolutions are often easier said than done, however. Psychologists tell us that it takes at least three weeks for a habit to start to become a permanent change. Many of us have forgotten or dropped our individual New Year’s resolutions by Groundhog Day.

Small business owners often vow to examine their operations during the past year and find ways to improve them. Once the holidays end and things start running as before, many of us fall back into our same routines and the vows to change become unfulfilled.

According to Psychology Today, New Year’s resolutions fail when goals are unrealistic and when we place time bounds on changing behavior. Instead, create an area of focus and keep at it, rather than specific goals with time constraints that you may not be able to reach (and then become disappointed because of failure to meet the deadlines).

Recommended Financial Resolutions for Your Small Business

When small business owners seek my advice for securing capital, I tell them that they must become financially prepared to apply for loans. Consider the following to be business financial resolutions that any small business can carry out:

Trim Your Budget

Before you expand, you may need to trim. Entrepreneurs often seek funding because they plan to expand their operations in the coming year. Cutting excess weight is a good first step. Review expenses with your accountant to find areas where costs can be reduced, thus improving cash flow. Monitor inventory; unless there is significant financial incentive (in the form of a price reduction) to buy more, use what’s already on hand before ordering more inventory. Examine staffing. Businesses with seasonality should be the most vigilant. Cutting the hours of underutilized staff – especially part-timers – can result in significant cost reductions and improved cash flow. The better your financials look when applying for a loan, the better your chances of securing funding.

Become Neater

Shoddy record-keeping can easily lead to losses. Keep track of all of the revenue your company has generated and all of its expenses. Be sure to hang onto petty cash slips and keep records of anyone you may have paid cash. After all, you can’t become profitable without having a firm grasp on revenue and expenses. If you do your own accounting but don’t feel like you’re an expert in it, hire an accountant who specializes in small business. The benefits will likely outweigh the costs.

Be the Early Bird

If you plan to apply for a small business loan, you will need to provide tax returns for the past two to three years. By getting your 2017 forms into IRS in January or February, rather than April 15, you will be able to provide the required documentation more quickly. It’s an added bonus if you are expecting a refund because you will get it sooner. However, even if you wind up owing money to the Uncle Sam, paying it off sooner rather than later will put you in a stronger position to ask for a loan a little bit down the road.

3 Tips for Keeping Your Small Business Financial Resolutions

So now that you have some advice, here are 3 tips for keeping your small business financial resolutions:

  1. Focus on one goal at a time. If cutting expenses is you main goal, once a week schedule time to sit down and analyze expenditures and find out where the excess is. Then get rid of the excess. Once you find success, move onto the next goal.
  2. Celebrate the small victories. If you found a way to reduce staff hours by 10 percent, be proud – even if your goal was a 25 percent reduction. Keep track of your progress and keep working towards your goal.
  3. Stick with it. Keeping resolutions should be a year-long effort. Don’t wait until Dec. 31 to try it again.

The beginning of the year gives everyone a chance to turn the page and start anew. Making financial New Year’s resolutions and sticking to them will take a lot of effort. By striving continuously to achieve goals – and accepting that there will be setbacks from time to time – will put you in the right frame of mind to achieve them in the long run. The ultimate measure of success will be whether your business is in better financial shape in December 2018 than it is at the beginning of January.

Source: https://smallbiztrends.com/2018/01/small-business-financial-resolutions.html

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There Is a FinTech Startup for Almost Any Bank Service

FinTech companies around the world have now reached the potential of substituting almost any service from the banking value chain. The legitimate question to be raised then is: if there is a startup for each service a bank provides, do we really need banks? The banking industry has been and is a massive machine providing comprehensive financial services. Any bank nowadays can serve any financial need for the eligible population. The word ‘eligible’ plays a vital role here. One of the core differences in approach to financial services between banks and FinTech lies in democratization. FinTech companies often aim to serve a noble goal of global financial inclusion and making financial services more accessible for those not fitting into the credit score-based estimation of eligibility for another loan.

Certainly, any venture also serves the goal of making a profit and FinTech is no exception here. FinTech companies don’t have the luxury of almost infinite funds that major banks have, which leads to the necessity of attracting investments. Any investment aside from the benefits of company growth and technology development brings a burden of the necessity for a financial return. So there are no illusions regarding FinTech – it is still a venture desired to be profitable.

Putting aside the profitability factor, in 2016, FinTech will become an extremely powerful vehicle that might be able to eat up even more of the banking profit than it ever was able to. The fact that most of the major banks have lately been involved with FinTech in various ways, speaks to the realization of that threat.

In fact, FinTech has become so hot, that in December 2015, FinTech companies around the world  raised almost abillion dollars. Moreover, January 2016 was even more fruitful as an extra $7 billion went into the FinTech large pocket.

While banks have always been looking to control the financial services industry, with the rise of FinTech, the situation has changed drastically. Now banks are looking to collaborate with FinTech so as to not to lose the links in the value chains that make them so powerful. An example here could be Bank of America that recently was reported to collaborate with Viewpost to solve the cash flow problems of small businesses. BofA also aggressively files blockchain-related patents to secure its position in the industry getting ready for the time when blockchain massively conquers the market. Moreover, the bank is willing to part with $3 billion to invest in promising FinTech startups.

Another financial industry giant, Amex, is exploring the payments segment though American Express Ventures, the company’s dedicated investment fund for investing in FinTech and related startups. AmEx has always focused on international payments companies. Most recently, AmEx invested in the Mexican equivalent of Square, Clip. Clip’s first partner is American Express, which represents 30% of the total payment volume in Mexico, but has only 3 million of the roughly 30 million credit and debit cards in use in the country.

There are many more examples of collaboration in various segments, but that is not the focus. What is important here is that major institutions are going after the FinTech startups that are able to facilitate or substitute certain services in their value chain in a more cost-effective manner. If we were to decompose a bank, there would be a FinTech company that can substitute each service the bank provides. However, a single ‘problem’ remains – banks are still holding our accounts. In the most fatalistic prediction, a bank would be a back office organization maintaining an account, which is utilized by various FinTech companies providing their services. So we still need a bank, but not for the reasons we needed it ten years ago.

fintech companies

Being a global FinTech destination, the LTP team has seen some extremely hot and promising startups in all segments. There are FinTech companies firing up payments, lending, PFM, remittance, etc. As you can see from the simple chart above, a bank customer can receive almost every service the bank provides from a wide range of FinTech startups. And many of them were extremely successful stealing high-margin services from banks. One recently launched mobile banking startup Pocopay even debates the necessity of banks at all, sharing in its blog, “We are bankers who believe that people don’t necessarily need banks but people still need banking. We are also designers and engineers who believe that there is no excuse for complicating everyday things with an out-dated design. Bringing together the old and the new, inspiration from the young and lessons from experienced bankers, we have built Pocopay.”

An average customer may not know, but there are at least 20 successful FinTech startups powering banks. With those companies banks are able to significantly cut the operational costs moving certain parts of the business out of the house.

DemystData is one of the examples. The company provides comprehensive profiles and refined customer predictions to help financial institutions optimize customer interactions. Founded in 2010, the company was valued at $33.3 million last year and powered more than 375 million transactions through comprehensive evaluations with more than 5,000 attributes from more than 150 sources. Among the company’s clients are Citi, Accion, Avant, SingTel and others. The company has screened more than 300 million customers.

Figo is another interesting example. Figo banking API enables developers, startups and banks to connect to every financial service provider. These partners can access every bank account (current, savings, loan, securities, etc.), credit card, e-wallet and other financial services through one single REST-API. The company is valued at $5.19 million with 30,000 active users.

FinGenius also stands out as it is a bank-grade platform that combines artificial intelligence, machine learning, natural language processing and human-like reasoning to simplify interaction with complex data for banks and insurance companies. Among its clients are BMW and Panasonic. The company participated in FinTech Innovation Lab London and received support from banking giants like Bank of America Merrill Lynch, Barclays, Citi, Credit Suisse, Deutsche Bank, Goldman Sachs, HSBC, JPMorgan Chase, Lloyds Banking Group and others as one of the most promising startups.

And there are many more examples proving that over time banks may become sort of ‘warehouses’ bringing together FinTech startups to serve each particular need of a customer. Even in that case, however, banks will still be an immense part of our lives as they bring expertise and experience making customers confident in their financial security.

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Is Alternative Lending a Perishable FinTech Segment?

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BLOG : Cashadvanceamericacom

Despite competitive propositions and momentary advantages that alternative lenders may have over incumbents, it is likely that banks will eventually drive this particular FinTech segment out of business. That moment, however, will come after a brief time of mutually beneficial collaborative work that we will witness in the years ahead. Though alternative lenders will get to see growth and prosperity in the short term, the long-term success of this segment is questionable. In fact, the more sophisticated data analytics, regulatory technology and risk management solutions developed by FinTech startups get, the less time is left for alternative lenders to leverage their often overhyped position.

At the moment, banks and alternative lenders make natural allies, bringing to the table strengths of one another while addressing challenges each face in the increasingly complex environment. Combining an easy and quick online application process, fast decision-making, convenience for customer and flexibility of alternative lenders with the scale of institutional lending capacity can make a significant difference for startups, banks and the market structure alike.

However, while there are certain FinTech segments that do appear to have a bright future – such as banking technology companies, advanced security solutions providers, etc. – alternative lenders may soon lose their competitive advantages as banking professionals learn and adopt new technologies and business models. Moreover, startups in other FinTech segments (AI, blockchain, etc.) are actively contributing to the obsolescence of this particular class of companies as they contribute to the accelerated learning and innovation adoption in the formal banking sector.

Banks will drive alternative lenders out of business by partnering and learning from them

Alternative lenders at the moment have an upper hand due to the ability to expand the capital reach by accessing the pool of customers willingly or be forcefully ignored by institutional players. The ability to offer a loan in five minutes came as a result of bending the standards of risk assessment and adoption of underwriting techniques that take into account a different set of characteristics.

This particular advantage, however, is perishable. At the moment, an increasing number of institutions tie up with alternative lenders to expand the capital reach and transform their business model in favor of a more cost-efficient strategy. At the moment, those partnerships are highly beneficial for both parties as they offer stability to lenders and new channels to banks.

In those partnerships, banks attain an invaluable knowledge on evolving risk assessment models and expand their vision of customer evaluation techniques, moving further away from traditional FICO-based scoring to more customer-specific, relevant to the new target audience schemes.

Moreover, in partnerships, banks gain access and the ability to adopt best practices in ensuring superior customer experience (which alternative lenders are undeniably far ahead in). An acqui-hire model of interaction will lead talented professionals from FinTech right into the traditional sector to bring out the best from a startup into banking.

In partnerships, institutions will gain better visibility on international expansion strategies, which allowed FinTech startups to shed barriers leveraging technology rather than significant capital infusion and investments in physical infrastructure. Alternative lenders may become cost-effective loan distribution channels for banks and discontinue existing as an alternative to incumbent offerings. For banks, it will signify a business model transformation; while for startups, it will mean the loss of their competitive edge and, at the end, the market need for their existence.

At the moment, banks and alternative lenders make natural and perfect allies

While the expansion of credit access, greater transparency, enhanced speed and superior customer experience expertise slowly flows from FinTech into institutional banking, alternative lenders and banks do make perfect allies.

Multiple partnerships prove those relationships to be important for both parties and beneficial for customers –especially for underserved groups of the population. Partnerships such as Avant and Regions Bank, OnDeck and JPMorgan Chase, Kabbage and Santander, Kabbage and ING, Prosper and Radius Bank, Lending Club and Union Bank, and other industry examples represent a mindset transformation and strategic work in place to learn rather than to invest efforts in competitive strategies.

Partnerships drive a revival of lending for the banking sector, stabilize startups operations and performance, extend credit to new groups of population, and improve the service for existing bank customers. In the long run, financial institutions are the ones to benefit the most simply because of their historically developed and grown capital capacities, often cross-generational ties with customers and a range of other important strengths that will allow them to use those partnerships as a stepping stone to greater market share.

Source by : https://letstalkpayments.com/is-alternative-lending-perishable-fintech-segment/

Trump Bump Extends to Small Business Lending, Biz2Credit Reports

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According to Biz2Credit the “Trump Bump” is extending beyond the stock market to small business lending. In its recent report, Biz2Credit says that lending at big banks ($10 billion+ in assets) and institutional lenders finished the year strong, improving to post-recession highs in December 2016. And President elect Donald Trump is being given at least part of the credit.

Biz2Credit Lending Index December 2016

According to the report, small business loan approval rates at big banks jumped to 23.9 percent in December, marking the fifth consecutive month of increases for this category of lenders.

Additionally, institutional lenders extended their increased loan approval rates for the sixth consecutive month, approving 63.4 percent of loans in December alone.

“The combination of an improving economy and the expected deregulation of the financial sector when Donald Trump takes office has provided banks with optimism. This has resulted in higher loan approval rates in recent months,” said Biz2Credit CEO Rohit Arora. “After a slow start to the year, banks aggressively worked on closing deals to bump up their end-of-the-year targets.”

Arora adds that the biggest benefactors of the incoming Trump administration are small banks that have been feeling pressed and held back by regulations under President Barack Obama. In December alone, small banks increased their loan approval by one-tenth of a percent to reach 48 percent approval. This is an encouraging sign as loan approval at small banks had stagnated throughout 2016.

However, it isn’t all good news for all lenders as loan approval rates at alternative lenders and credit unions dropped significantly, as they registered 58.6 percent and 40.9 percent approval rates respectively in December.

“As banks and institutional investors continue to invest in technology to streamline lending, alternative lenders are losing their competitive advantage, which allowed them to charge borrowers higher interest rates,” Arora said. Credit unions are on the other hand becoming something of a forgotten option for small business borrowers.

Biz2Credit reports on small business lending trends based on the analysis of more than 1,000 small business owners who apply for funding using the online lending platform.

SOURCE: https://smallbiztrends.com/2017/01/biz2credit-lending-index-december-2016.html?tr=s-ep

Is Alternative Lending a Perishable FinTech Segment?

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Despite competitive propositions and momentary advantages that alternative lenders may have over incumbents, it is likely that banks will eventually drive this particular FinTech segment out of business. That moment, however, will come after a brief time of mutually beneficial collaborative work that we will witness in the years ahead. Though alternative lenders will get to see growth and prosperity in the short term, the long-term success of this segment is questionable. In fact, the more sophisticated data analytics, regulatory technology and risk management solutions developed by FinTech startups get, the less time is left for alternative lenders to leverage their often overhyped position.

At the moment, banks and alternative lenders make natural allies, bringing to the table strengths of one another while addressing challenges each face in the increasingly complex environment. Combining an easy and quick online application process, fast decision-making, convenience for customer and flexibility of alternative lenders with the scale of institutional lending capacity can make a significant difference for startups, banks and the market structure alike.

However, while there are certain FinTech segments that do appear to have a bright future – such as banking technology companies, advanced security solutions providers, etc. – alternative lenders may soon lose their competitive advantages as banking professionals learn and adopt new technologies and business models. Moreover, startups in other FinTech segments (AI, blockchain, etc.) are actively contributing to the obsolescence of this particular class of companies as they contribute to the accelerated learning and innovation adoption in the formal banking sector.

Banks will drive alternative lenders out of business by partnering and learning from them

Alternative lenders at the moment have an upper hand due to the ability to expand the capital reach by accessing the pool of customers willingly or be forcefully ignored by institutional players. The ability to offer a loan in five minutes came as a result of bending the standards of risk assessment and adoption of underwriting techniques that take into account a different set of characteristics.

This particular advantage, however, is perishable. At the moment, an increasing number of institutions tie up with alternative lenders to expand the capital reach and transform their business model in favor of a more cost-efficient strategy. At the moment, those partnerships are highly beneficial for both parties as they offer stability to lenders and new channels to banks.

In those partnerships, banks attain an invaluable knowledge on evolving risk assessment models and expand their vision of customer evaluation techniques, moving further away from traditional FICO-based scoring to more customer-specific, relevant to the new target audience schemes.

Moreover, in partnerships, banks gain access and the ability to adopt best practices in ensuring superior customer experience (which alternative lenders are undeniably far ahead in). An acqui-hire model of interaction will lead talented professionals from FinTech right into the traditional sector to bring out the best from a startup into banking.

In partnerships, institutions will gain better visibility on international expansion strategies, which allowed FinTech startups to shed barriers leveraging technology rather than significant capital infusion and investments in physical infrastructure. Alternative lenders may become cost-effective loan distribution channels for banks and discontinue existing as an alternative to incumbent offerings. For banks, it will signify a business model transformation; while for startups, it will mean the loss of their competitive edge and, at the end, the market need for their existence.

At the moment, banks and alternative lenders make natural and perfect allies

While the expansion of credit access, greater transparency, enhanced speed and superior customer experience expertise slowly flows from FinTech into institutional banking, alternative lenders and banks do make perfect allies.

Multiple partnerships prove those relationships to be important for both parties and beneficial for customers –especially for underserved groups of the population. Partnerships such as Avant and Regions Bank, OnDeck and JPMorgan Chase, Kabbage and Santander, Kabbage and ING, Prosper and Radius Bank, Lending Club and Union Bank, and other industry examples represent a mindset transformation and strategic work in place to learn rather than to invest efforts in competitive strategies.

Partnerships drive a revival of lending for the banking sector, stabilize startups operations and performance, extend credit to new groups of population, and improve the service for existing bank customers. In the long run, financial institutions are the ones to benefit the most simply because of their historically developed and grown capital capacities, often cross-generational ties with customers and a range of other important strengths that will allow them to use those partnerships as a stepping stone to greater market share.