Small Business Funding Trends You Need to Watch Out For in 2021

2020 has been a year of disruption for many small business owners across the world. After the whole year of turmoil and change, small business owners are looking again to the future. There are numerous reasons to be optimistic for businesses that have been affected by COVID-19 and are looking to reopening and rebuilding after the pandemic. 


The vaccine is finally here, the SBA is currently accepting second round PPP applications, and entrepreneurs are making strategies to return to the pre-COVID era. Businesses that have been successful in saving their existence during this hard and weird time will have more small business financing options in 2021. 

To help prepare and harness the benefits of this exciting financial opportunity for your small business, we’re sharing some of the financial statistics and trends you should be mindful of in 2021. 

More Lenders will Serve Small Businesses 

Lenders Provide Small Business Loans

43% of small and medium-sized businesses applied for a loan in 2020. 14% of businesses only received a portion of their requested funds. Besides 36% of the entrepreneurs were denied because of their poor credit scores and only 48% of the small business owners in total were approved for the loan last year. 

Small businesses hit by Coronavirus were struggling to get emergency loans and that was obvious. But in 2021, lenders whether it’s banks, credit unions, alternative lenders, and fintech are willing and able to provide working capital to small businesses. 

Though some lenders can be timid about lending to specific industries while some small loan types can have tighter underwriting standards, lenders will want to work with more and more small businesses in 2021. 

Traditional lenders may increase the loan guarantee to lower the risk. It will also boost the confidence on lenders’ part to issue a bank loan. Borrowing will be more affordable for small business owners having stellar credit scores, good business revenues, and positive cash flows. 

Alternative Lenders and Fintechs will be Major Provides of Loans

32% of small business owners have chosen online lenders for their financing needs in 2020. Banks will play their part in business funding as well, but fintechs and alternative lenders are expected to be the main providers of small businessfinancing in 2021. 


Alternative Lending and Fintech

The ability of fintechs and online alternative lenders to utilize futuristic technology and offer easy and fast lending services to small businesses with a bad credit history will help to penetrate the market and achieve success. 

In 2021, it will be easier than ever to find and compare a variety of loan offers with the help of fintech. Small business owners searching for the right loan to meet their unique financial needs will find an online funding marketplace a viable option to get funds. These marketplaces will connect businesses with multiple lenders using technology so they can compare loans for interest rates, fees, repayment terms and choose one that will meet their current financial needs and budget. 

Technology will play a Vital Role in Managing Finances 

Thousands of small businesses have stayed afloat and on top of their financial situation during the unprecedented time last year, thanks to their ability to pivot to online business models. COVID-19 has taught businesses that it is more important than ever to embrace technology to meet customer demand and needs in real-time. 

When financial service organizations around the world had to shift employees from an office to their homes quickly during the early days of the pandemic, then it was the technology that kept the pipeline open, handled the influx of inquiries, processed loan requests, and provided valuable advice. Similarly, the pandemic had changed the way small businesses work, forced thousands of physical brick-and-mortar businesses to adopt technology to move online. 

Technology that helped both lenders and business owners will continue to play a vital role in managing finances in 2021. cloud -computing, accounting, blockchain, Robo-advising, mobile payments, online lending, hybrid cloud, machine learning, instant payments, artificial intelligence and more, many state-of-the-art technologies from fintech innovators will make it possible to do everything from forecasting cash flow to launching e-commerce websites, making automatic invoice bills and payments and ordering from anywhere, anytime. 

Leveraging financial technology in 2021 will help small businesses effortlessly operate day-to-day operations, streamline business processes, and boost the overall performance of their company’s finances 

Here are some of the many top financial tools that can help small businesses enhance their bottom line in 2021: 

       Cash flow forecasting and scenario planning software


       Financial planning and reporting tools

       AI-powered CPM tools

       Budgeting tools (Maxpine)

       Online transaction tools (Smansha)

       Financial analytics (scoro)

       Inventory and risk management (Ntaskmanager)

       Income and expense tracking

       Billing and invoicing software (Scoro)

Billing and Invoice Software by Scoro

Regardless of how desperate and dark 2020 was, 2021 will be a changing year for all small and medium-sized business owners. Take time to evaluate what can work well for your business finances so you can successfully run and grow your small business in the coming times. Use 2021 as an opportunity to reanalyze and rebuild your business finances so that it stays strong and sustainable.

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