For Entrepreneurs Seeking Cash, There’s an App for That

When small business owners find themselves in a bind to cover the cost of an emergency stock order, or just need a spot influx of cash, more and more they are turning to their smartphone. But not to call their neighborhood banker.

Instead, they are thumbing an app, punching in a few numbers and waiting just a short few minutes to access an advance on an existing business loan, or apply for a loan.

The mobile revolution has come to the lending industry, and specifically, small business lenders. A growing number of banks and other lenders are opening access to their services through smartphone apps, making their services easier to access than ever before.

“It sort of allows them to get funding on the go and to take advantage of prices,” according to Victoria Treyger, the Chief Marketing Officer of Kabbage, an online small business lender that introduced apps for iPhones and Android phones in September.

Entrepreneurs can not only take advantage of timely discounts on inventory, they can also access in minutes the cash reserves needed to cover a spot inventory purchase if they are running short of supply, or have to make alternate purchases due to a delayed shipment of stock already on order.

Apps are also available allowing business owners to apply for loans. Madison, Wisconsin-based insurance company CUNA Mutual — which offers small business loans — developed such an app in 2011, and now generates 19 percent of its loan business from mobile devices.

Apps have also been developed that connect investors with small businesses seeking cash. One such app belongs to on-line marketplace Prosper.com, through which businesses can take out loans while investors can, well, invest. Borrowers have access to up to $35,000 on Prosper.com. Investors can get in for as little as $25.

Apps such as the San Francisco-based Prosper.com’s are growing in popularity among investors as well as small business borrowers. Sites such as IOU Central allow accredited investors to lend directly to borrowers, in essence “buying” loans from a pool of applicants.

Such easy access to loans does have its downside. Kabbage lending data show evidence that the presence of such an app on a business owner’s smartphone could lead to impulse borrowing. Kabbage’s Treyger told washingtonpost.com that her company’s typical borrower has a $23,000 line of credit. She said those who use a PC to access the credit line take seven to nine advances a year. App statistics showed those who have used mobile devices to access their loans are on pace to take several more annual advances, and have drawn $1 million in advances since September.

Reference:

Ravindranath, Mohana. “How smartphones are changing small business lending“; Washington Post. 12/06/13.

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