Differences Between Business Financing From Banks And Fintech

business finance

Banks, VCs, and other traditional lenders had dominated the lending land for centuries. Every small business owner out there knows that isn’t good news. Obtaining small business financing from banks isn’t a cakewalk if you lack a solid credit profile, outstanding trading history, and substantial business revenues. If you’re lucky to qualify, you’ll have to bear with a bureaucratic, paper-laden application process and lengthy approval period.

Thanks to the internet and the rise of cutting-edge financial technology. FinTech lenders that offer faster business financing services have matched into the lending gap to provide business owners the capital they need to grow their businesses.

Pros and cons of small business financing from banks

business financing from banks

So should you obtain a small business loan from a bank or a fintech company? To help you make a better decision between a bank and a fintech lender, we analyze the pros and cons of business loans from banks and fintech.


Low-interest rates

Banks offer loans at the lowest interest rates than you can find anywhere else. Per recent data, business loan interest rates range from 2.58% to 7.16% at banks. Rates for SBA loans range from 5.50% to 8%.

However, these low interest rates aren’t for everyone. They are reserved for borrowers with a solid business profile and a high FICO. 



Banks require excellent credit

Typically, banks love to see credit scores between 700 and 850 to label you as “good risk” and approve you for higher loan amounts at favorable terms rates. If your FICO score dips below 700, you’re less likely to qualify for a small business loan from a bank, or you may be hit with higher interest rates.

Also read: Here Are Ways That You Can Save Money As A New Business.

Profitability and long trading history

Small business loans from banks aren’t accessible to everyone. You may have an excellent credit score, but unless you can demonstrate an established trading history, profitability, and outstanding business revenues, your company will face hurdles to qualify for a traditional loan.

Lengthy application process

Compared to other lenders, banks have the most complicated application process and require you to fill out excessive paperwork. 

Apart from filling out the application form, you’ll be required to gather and prepare multiple financial documents through scanning, copying, and printing financial data from the SMB and hand them over to the bank via mail or in-person. 

Lengthy approval period

It takes time for the credit team to analyze all the submitted business records, build a risk file, and decide your fate. It may take weeks to months before you get approved for business financing from a bank.

Need for collateral

Solid credit score and business profitability aside, you’ll need to back up your loan with some form of collateral –an asset that the bank can seize and sell to recover their money if you’re unable to repay the loan.

Pros and cons of small business financing from fintech

business financing from fintech


Minimum requirements

Fintech lenders welcome customers that banks turn away. You can qualify for business financing from a fintech lender with bad credit or no credit and a trading history of less than a year. Online lenders like caminofinancial.com welcome borrowers with a credit score of 550, 9 months in business, and as little as $30,000 annual sales or $2,500 monthly revenues.

Quick pre-approval and faster funding


This is where fintech lenders beat banks hands down. Fintech lenders offer quick pre-qualification and short approval periods. Simply submit basic information about your business, required business documents, and financial records online. You’ll know where you stand within 24 hours. Once you accept the loan terms, money will be in your account within 1-10 business days.

Transparent loans terms

Transparent loans terms

Loan terms and interest rates can get complicated when obtaining financing for small businesses from a bank. That’s why you should read the fine print carefully before signing on the dotted line.

On the contrary, transparency is the word of the game from reputable fintech lenders. They provide small business loan calculators on their websites so that you can determine upfront the cost of the loan in terms of monthly repayments and the total interest you’ll pay. No surprises down the line.

Apply from anywhere

You don’t have to close your business or worry about banking hours. You only need an internet-enabled device to submit all the required information and digital business records online from the comfort of your business. In fact, you can apply for a loan at night and have the money in your account in the morning.

Loans without Social Security Number (SSN)

Minority business owners, especially immigrants, don’t stand a chance with banks. Luckily, fintech lenders like Camino Financial offer ITIN loans for merchants without SSN.

No need for collateral

You won’t need to risk personal or business assets to obtain a loan from a fintech lender.


Relatively high-interest rate

Interest rates for small business loans from fintech lenders can be anywhere between 9% to 99%. That’s quite high compared to banks that can have interest rates as low as 2.5%. 

Obtain business financing from banks or fintech

Banks are great places to obtain small business financing at a low cost if you’ve got excellent business credit, an established profitable business, and are willing to wait. That’s rarely the case with many small businesses.

If you’ve only been into business for less than a year, have poor credit, and need funding faster, fintech lenders are your best bet. They’ve got a simple application process, quick approval & faster funding, and can provide loans to minority businesses without SSN.