Why Are SME Loan and Invoice Financing Applications So Slow?

Published
October 31, 2024
If you’re a small or medium-sized enterprise (SME) looking for business funding, chances are you’ve spent a lot of time researching different options like loans, invoice financing, or merchant cash advances.

You finally choose a lender, start an application, gather all the requested documents, and wait. After all that effort, there’s still a chance your application could be declined—and you might not even know why. Frustrating, right?

Common Reasons for Loan Declines

Aside from fraud concerns, the two biggest reasons for loan application rejections are:

  • The lender doesn’t believe you can repay the loan. Put simply, they don’t trust your ability to return the money.
  • The lender’s policies don’t align with your business. Sometimes, your industry isn’t eligible for funding based on the lender's internal rules. But again, it boils down to a lack of trust.

Lenders, especially banks and financial institutions, are subject to strict regulations and compliance requirements. This makes their application process lengthy and complicated, as they focus more on satisfying regulators than offering a smooth customer experience. The result? A slow, frustrating process for you.

A Real-Life Example: Escrow Payments Nightmare

Let me share a quick story. A few years ago, one of my clients operated a B2B wholesale marketplace with an escrow service, partnering with an Electronic Money Institution in France. This payment platform required every seller to provide tons of documents—identity proofs, registration papers, articles of association, shareholder declarations, and even apostilled documents in some cases. Each document was manually reviewed, which could take weeks or even months. Sellers couldn’t access their money until they were fully verified.

This manual process was inefficient and outdated. But could they have done it better? Absolutely. By automating many of the compliance checks, this provider could have cut down processing times significantly. And the same principle applies to the lending industry today.

Loan Approval & Pricing: Not Just Yes or No

Even if you get approved for funding, there’s often another issue—pricing. Lenders may be willing to give you the money but at higher interest rates or stricter terms than you expected. This is because lenders adjust their offers based on how much risk they believe your business represents. Unfortunately, you usually don’t find out the pricing until after you’ve shared a lot of sensitive information.

What’s Changing in the Funding Industry?

The good news is that the world of business funding is undergoing a digital transformation. Here are a few trends making things easier:

  • Public company registers: In most developed countries, company information is publicly available.
  • Open Banking/Open Finance: Lenders can access bank accounts and transaction data via secure APIs.
  • E-invoicing: Invoice data can be accessed through APIs from accounting and invoicing platforms.
  • AI & computer vision: Identity checks can be done in real-time.
  • AI tools for fraud detection: Technology now helps spot potential fraud before it happens.
  • Marketplace integrations: Businesses selling on platforms like Amazon, Shopify, or Etsy can share their data through APIs.

Despite these advancements, every lender sticks to its own policies and uses tools & systems that overlook many business data points. It keeps the industry fragmented and slow.

The Invoys Solution: Faster, Easier Funding

At Invoys, we believe business funding applications should take minutes, not days or weeks. We’ve simplified the process, so you can get personalized funding offers that fit your business in just a few easy steps:

  • Provide basic information about your company.
  • Authorize access to your primary bank account.
  • Authorize access to your accounting, ERP, e-invoicing, or e-commerce platform.
  • Complete a simple identity check.

This process gives us enough information to understand your business's structure, revenue, seasonality, debts, etc. Invoys technology compiles this data in near real-time, allowing to cross-check it from multiple sources and build a trustworthy business profile.

With this profile, we can match you with lenders ready to offer funding at terms that work for your business. If you sell online, for example, a Merchant Cash Advance might be a better option than a traditional loan. Instead of applying separately to each lender, you only need to share your business profile, reducing the workload for both you and the lender.

Conclusion

The days of slow, frustrating SME loan and invoice financing applications don’t have to last forever. With the right technology and smarter processes, funding can be fast, transparent, and tailored to your needs. At Invoys, we’re working to make that future a reality. Stay tuned, because the future of business funding is changing—for the better!

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