They have straightly complained that their rivals are ruining
their creditability in the market by following some serious malpractices. Though, some people think that the competition of one online loan vendor with another will destroy this fine line of business.
"There is another danger that makes the financial consultants more worried as compared to other reasons. The reason is being stated below".read more..
Small business investors are reluctant to rely on online banking
Few years back, when the internet banking was coming to the market in its full form,& when it was being introduced and grabbed by people, the financial consultants made many guesses on its potential and utility. One of the greatest guesses on the potential of online business was that it is going to make a total resurfacing of the market that provides finance tothe Small business ventures. Unfortunately, none of the guesses proved to be right in the current time. You will hardly find any online banking system working with the small business investors. Instead of resurfacing the financing systems of the business, the online lenders are tripping over each other to find a new borrower for the survival of their business.
Why was the online banking an ideal choice for Small business investors?
The internet banking system is not just a small business project. This business project is backed by capitals where the amounts stand at a range of billions. At first, there were companies like the OnDeck Capital Inc, the Rapid Advance groups or the Kabbage Inc., who tried to make their fortune in the online lending business and they are still reigning on the sector. The market had enough potential due to their self-styled lenders who are performing their business, not only in the market; rather they are going door to door with their services of Monthly installment loans. That is why you will see that hundreds of many other companies have stuffed over the beginning companies since the very starting time.
Not only that, the online lending system is the fastest lending system among all others that came into the business. One can certainly get a very quick access to cash with the help of this virtual lending system, and all he or she will have to do is to make a few clicks. That is why, it was expected that this new banking system will leave behind the business of various mainstream banks. The implication was thought more for the small business investors than anyone else. Unfortunately, the small business investors seem reluctant to pick up this option.
What is the scenario of the problem of online lenders and procedures to attract small business investors?
If you talk about the real scenario, you will find many problems in the procedures of the online lending system that creates the problem in the path of E-banking to pick new customers. Some of them are given below:
Finding new customers is an arduous job:
The main problem with the virtual lending system is that it might be assumed as a business sector where it is almost going to resurface the financing system of the small business investors. In actual life, it could pick enough customers for the business.
As the Federal Reserve Survey states it, this lending system is striving to get new small business investors as their customers. In the first half of 2014, the online lending system and procedures could only find 18% of the total applicant for the Small business loan. These were the only amount of people looking for the virtual lending system in the first half of the previous year.
The competition within the online lenders creates the greatest trouble:
It has been already stated above that the online lenders are already getting a lot of trouble in getting new customers for them. Now the new customers who are looking for their financing of loan options may get distracted by the competition of the market. For example: If a small business investor has applied for a loan, then immediately after applying he or she is flooded with phone calls and spam advertisements received from the rival lenders. The rival lenders would continuously try to have a piggyback on the borrower and turn themselves towards their business. The rivals would always be ready to sign up these borrowers for more credit& make the borrower attracted towards them. It is not a healthy competition at all.
This kind of animosity in the competition scares the potential borrowers. It may also result in loss of creditability of the online lenders among the small business borrowers. They may stop believing that they are the honest lender in the market.
Heaps of reckless loans, a self-created danger for e-banking:
The online lending system and its procedures have another drawback from the competition of its own. It is that for the high level of competition, the online lenders have become desperate to make new borrowers. They go on providing credits to the borrowers without even looking at the creditability of the borrower. The small business financing is not small loans. These are quite huge amount loans. When a lender is providing a loan of such a huge amount, he or she needs to verify a lot of things to check the credibility of the borrower for this loan. They do not do it for coping up with the competition. They keep focusing on providing fast credit to the borrower. As a result, the imprudent loans get piled up. Many financial consultants are worrying that if the weak competition could not kill this business sector, the tons of reckless loans will surely do the job.read more...