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Small and medium sized businesses traditionally require loans to get started or progress their companies. Often these loans require a tedious process that is costly of itself. With the advent of blockchain technology we are entering a time where a blockchain based digital marketplace that connects borrowers, lenders, and rated service agencies to provide a secure peer-to-peer marketplace for financing, is becoming a real possibility.
Blockchain Technology Efficiency
Blockchain technology has found a way to bypass the tedious procedures previously described, allowing for profit to be transmitted cheaper, safer and faster. How? A blockchain organizes all online activities into chunks of data named blocks, which are linked to one another forming a blockchain. What’s refreshing is the fact that there is no need for banks to verify transactions, instead, it is an ingenious system that arranges all transactions into an immutable ledger. As each block is added to the next, together they create an irreversible sequence, showing every event from beginning to end with exceptional security and transparency.
One notable example in the space is the FintruX network. FintruX Network has made great use of the blockchain technology to help create their peer-to-peer lending solution. FintruX Network makes it easy for small businesses to quickly secure affordable loans with no collateral, in any currency, and there is no upfront cost necessary for any of the participants on their platform.
Small-Business Loans Can Be Profitable
It was recently announced that Amazon has made $1 billion in small-business loans, varying from $1,000 to $750,000 for up to 12 months, to more than 20,000 merchants in the United States, Japan and the U.K. during the last year. It goes without saying that this move is making a lot of fuss, bringing many opportunities to business owners. FintruX wants to capture this segment and realizes that direct lenders are often able to rapidly issue loans whilst banks and traditional lenders will make use of the platform to get in on faster, easier p2p lending.
As a result, Nelson Lin, the CEO, has waited for the right technology to create a simple trustless world of borrowing and lending, where people trust the system, and it can positively impact the global economy. He points out why it is such a golden opportunity:” these technologies combined with risk-reduction mechanisms utilized by securitization funders, the arbitrage of vast interest rate differentials around the world, and a network of sophisticated operators and agencies will transform the finance world.” Consequently, his business has incorporated the cutting-edge technology for a safer, trustworthy and secure network.
Drawbacks of Traditional Financing and What Solutions to Employ
In the early stages of a business, owners find themselves needing a good cash flow for their business; therefore, they must investigate an array of options to finance their project. But, the traditional lending system has many drawbacks like asking significant collateral, or absurd rates and terms. Start-ups should not have to choose between bankruptcy and borrowing under unclear, unfair and uncertain terms. FintruX secures loans and enables companies to lend at favourable terms, that will put them at an advantageous position with good terms, rather than temporarily fixing their problems with an oppressive loan.
FintruX has found appropriate solutions to these issues, such as: credit enhancement, no-code development and an open ecosystem. The first one takes care of the lender’s risk by providing cascading levels of insurance to cover any possible loss. When lenders feel secure, they will automatically lower the interest rates for borrowers.
No-code development is in relation to the many applications that a smart contract employs. In the case of this network: “A unique smart contract is automatically generated and deployed for each approved loan in real-time to provide unambiguous, immutable, and censorship resistant records where no arbitration is required.”
Besides simplifying the loan application system, FintruX makes sure that rated agencies using the network will benefit from having an identity, KYC/AML procedures, credit scoring, a credit model, and payment solutions, providing lenders a wide variety of choices to adjudicate their loans. That is why an open ecosystem offers transparency and much needed insights for a smooth collaboration.
FintruX is playing in a clear market, with the goal to become one of the first blockchain applications that starts adding value in the real world. They are a well thought through company with a lot of good ambitions for the start-up sector. If you are interested in finding more details about FintruX, have a look at their listings and website.