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Boring bankers vs sexy fintech

A bank is a place that will lend you money if you can prove that you don't need it, the comedian Bob Hope has been quoted as jokingly saying.
According to Hope, and many others, banks and bankers are conservative, even “boring”.

Hope died in 2003, long before the rise of Fintech, which many would argue is the opposite of traditional banking – innovative, fast, risk-takers, even sexy.

Although traditional banks also have embraced technology and are trying innovative things, fintech players, including what some might call alternative lenders, are appearing around every corner of the internet.

These lenders typically offer hassle free, easy and fast loans, in contrast to Hope’s view of banks, and most, if not all, is done purely online.
The proliferation of fintech companies disrupting the financial services space, including insurance, wealth management, and banking, should be welcomed. Disruption to any sector is usually positive for consumers and leads to innovation (also amongst incumbents), more choice and most of the time, to lower costs.

Be wary of the quick money

But entrepreneurs should be wary of quick and fast money when borrowing from alternative lenders, because fast money in, could mean fast money out. This can be disastrous for the cash flow of the business, and ultimately, the sustainability of the business.

Entrepreneurs should look past the convenience of hassle free and fast loans.

Fast and easy usually means the requirements of what is needed is less, which might seem convenient, at the time.

But due to the less stringent requirements, those loans might not be the right one for your business as they are often more expensive, i.e. attract very high interest rates.

Do your homework

This could lead to a lot of hassle, and be very inconvenient, as the terms might not be favourable for growing a sustainable business, and associated costs of the wrong loan can put pressure on the cash flow of the businesses, which ultimately can lead to the demise of the business.

Entrepreneurs looking for financing must do their homework and weigh up their options, and decide: is this the funding that is needed?

With the right advice an entrepreneur can have the right funding solution to help the business grow sustainably.
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About the author

Dalene Sechele-Manana is head of specialised markets at Mercantile.