The Finance Monitor 2017 had fairly shocking results. Dutch companies contemplated financing for 15 billion euro but eventually only applied for 12 billion euro. How much was granted? 9 billion. This means 25% of the applications were rejected. Of course, a percentage of this fell short of quality. However, others were promising, but were unable to happen due to the rigid traditional credit demands. These are all missed opportunities.
Innovation is risky
Smaller and medium-sized companies with potential to grow are missing out on funding because the traditional financing channels are no longer suitable to them. This is mainly due to the strict requirements regarding lending which are becoming even stricter over time. Understandably, risks are being avoided. However this means the most innovative companies are considered the most risky. But shouldn’t we embrace and stimulate innovation? In which case, the goal should be to increase the success rate of credit applications. And we are able to achieve this with fintech.
At Topicus we put a lot of energy into a financial matchmaking platform which, just like Airbnb and Alibaba, brings supply and demand together transparently. The fintech behind this platform offers entrepreneurs the opportunity to submit a high-quality application to dozens of lenders in one go. Financiers can make an appropriate offer within a very short time and the entrepreneur can then compare the offers immediately. This gives you a clear view of the different options and the lead time is accelerated from an average of seven weeks to just a few days. The platform matches the expectations of the entrepreneurs of this day and age. It is fast, transparent, bundled, complete and clear. Nowadays you can manage everything with a few clicks or swipes, why not when it comes to credit?
Of course I realise finance is not the same as ordering a piece of clothing. It's all about trust. Are entrepreneurs willing to request through online means instead of having a face-to-face meeting? The relationship of trust with an adviser is important and most certainly when it comes to lending and in the orientation phase. However, society is changing. More and more people are doing 'preliminary research' online for both private and business purposes. This could be from purchasing a washing machine to a municipal license application. If this is the case, then why not do the same for lending? I expect public support for this type of financial services will only increase, especially if established names guarantee the robustness and soundness of the solution.
New opportunities for SME’s
It is not our ambition at Topicus to dispel traditional lenders. This market will always remain large. Fintech provides us with an opportunity to give high-risk and innovative companies a boost. To give an example, multiple providers can offer one financing solution to spread the risks between them. Months of researching will be a thing of the past and custom-made solutions developed by new technology will be the future. This offers new opportunities for entrepreneurs, particularly as fintech-solutions will continue to be developed further over the coming years.