The biggest challenge facing SMEs in the current economic situation is access to credit and financing facilities, which was traditionally one of their biggest obstacles before the outbreak of the pandemic. The barriers that traditional financial institutions impose on small businesses and entrepreneurs have now been exacerbated; however, FinTech lenders are succeeding in meeting the liquidity needs of these businesses. Ann Marie Puig, an entrepreneur and philanthropist from Costa Rica, discusses how these companies are helping SMEs recover.
Many FinTechs have developed a strategy to support those entrepreneurs who are excluded from traditional banking because of the strict requirements that are requested. Just by providing a root good as collateral, FinTech opens the way to credit for those entrepreneurs who want to start a business and do not have a history in the credit bureau.
Fintech is a word that arises from the union of two terms, Finance and Technology. These are companies that offer their customers innovative financial products and services, through the use of ICT technologies. These startups use financial technology as a means to lower costs and simplify processes, resulting in an efficient internet service for the user, while generating lower commissions in relation to traditional systems.
In short, Fintech means the union of technology and finance with the aim of creating financial services that are easy to contract and understand. They also offer a standardized price that allows access to a greater number of people and companies, on both the investment and the lending side. The digitization of the financial sector has come to stay.
After the crisis, access to credit became a very complicated task for many private people and SMEs. The banking system self-protected by enduing the conditions for its clients, without taking into account that liquidity is one of the pillars of the market system in which we live. The result was a major brake on economic activity due to the difficulty in accessing the credit of many companies. Fortunately, Fintech startups have proliferated in recent years, whose goal has been to fill this gap left by banks. For this purpose, different business models have been developed, including P2P loans, crowdlending, crowdfunding and a few others.
Explains Puig, “The most important challenge for business is to overcome this crisis as quickly as possible and immediately continue to innovate to respond to customer needs. It will be important to continue to drive financial inclusion strategies that allow more SMEs and entrepreneurs access to liquidity to develop operations and make the business prosper.”
In order to have tight projections of economic recovery, it is essential to consider the sector to which the business belongs and identify the changes that your industry and markets are undergoing. In this sense, businesses linked to the tertiary sector, such as tourism, catering and construction, will take longer to recover pre-crisis demand levels, so they will need to develop longer-term contingency plans that allow them to maintain operations.
To effectively adapt the business to the current context, it must be acted on flexibly and in advance, anticipating the decline in sales and adjusting fixed and variable costs in a way that ensures operability. In this sense, the digitization of processes and services is one of the lessons of this crisis in order to respond quickly to unexpected and abrupt changes in the scenario. Adds Puig, “Fintech is an ally for SMEs in this regard, as through their technology platforms they provide them with all kinds of flexible services, such as payment, transfer, accounting, credit and more.”
Crises bring unexpected changes, and these new opportunities need to be quickly identified and known how to take advantage of. To do this, it is necessary to anticipate variations in demand and adapt quickly to the new needs of customers, adjusting existing products and services or innovating with new proposals.
