Britain has been a pacesetter among countries within the European Union in taking on Financial Technology and has come up with well-defined parameter in the region. With the current decision known as Brexit, the implementation of those new parameters throughout the European Union will be impacted, as will the flawless capital flow between the Britain and European Union. The Brexit decision will even hold back small businesses in the United Kingdom as the economy will be less tempting for overseas investors to make investments there.
So the question is what does this Brexit from EU mean for us here in the United States? Rohit Arora, CEO and Co-founder of Biz2Credit said that “the Brexit decision is not good, as it is already moving to unwanted instability”. This decision doesn’t help or benefit the Britain or the world, particularly when the world growth is slow. When lenders and financing firms here get dread, they usually become more reluctant to take risks, which is not good for the small business borrowers.
Over the last 5 years, the credit flow has increased considerably. For instance, according to the Biz2Credit Small Business Lending Index, the approval rates for small business loans were 23.2% from big banks in May 2016. And two years back in May 2014, big banks granted less than one out of five loan requests almost 19.6%, although in May 2011, the number was less than one out of ten almost 9.8%.
Large banks tend to be conservative. In the meantime, non-bank lenders such as private lenders and institutional investors have involved into the small business credit market through different market lending platforms. According to the research conducted by the US Department Of The Treasury, “marketplace lenders made almost $1.9 billion in small business loans in 2015, almost 60% increase from the previous year.
He also said that the rattling of financial markets could intimidate the development that we’ve seen in small business financing. Further uncertainty comes out from the approaching presidential election, which has been more unstable as compared to any other promotional campaign in recent history. While he started at a time at which there has been no place to go but upwards, most of President Obama’s time in office has coincided with slow but steady economic progress. He also added that,” I don’t think that the decision on Brexit from EU fallout to completely stop the wheels of Main Street lending and the Financial Technology revolution”.
The use of big data-driven analytics in small business loan underwriting, has impacted small business lending for the long period of time. And the good news is, the Brexit decision from EU may not be as upsetting as it’d had been had it befell almost 10 years ago. Arora said, “Despite the fact that “Brexit” may also unnerve our small business industry in the immediate future, I am assured that the effect will not be upsetting.