If you are a small business owner, you may know how difficult it is to get a business loan from banks and other financial institutions. The number of small business loans by traditional lenders has been on a decline since the 2008 financial crisis. This is not exciting news for small business owners who require financing to keep their small businesses moving.

However, this doesn't necessarily mean you can't acquire a business loan when you need one. You can always get a loan from a direct lender. You don't have to only rely on traditional lenders; direct lenders are a great option for short-term loans. Here are five benefits of working with direct lenders.

1. Easier loan approval

Have you ever wondered why big banks and financial institutions are not interested in giving out loans to small businesses? It's because the returns associated with small business loans are not worth the risk to them. Direct lenders don't think this way, which makes it easier for small business owners to get financial assistance from direct lenders.

2. Flexible loan terms

Unlike strict bank loan terms, direct lenders offer flexible loan terms that are favourable to small business owners. They are more accommodating when it comes to their interest rates. If you have a good credit score, you have a good chance of securing favourable terms with a direct lender. If your credit score is not good, direct lenders can still find an option on how to work with you.

3. Quick cash release

Time is of the essence for small business owners looking to keep their businesses afloat. Traditional lenders do not realise this, and most of them take a while to approve loans and release the cash. This is not the case with direct lenders, most of whom operate their businesses online. This means they approve loans and release loan cash quickly.

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4. No large down payments

Normally, banks and bigger financial institutions require a huge down payment before they agree on repayment terms. This is unfavourable to small businesses, most of which do not have the ability to make a big down payment. Generally, direct businesses don't require big down payments. However, there will be times when down payments will be unavoidable, but be sure they will be reasonable for small business owners.

5. You can acquire working capital

Working capital is the money required to fund a business's daily activities. Most banks and financial institutions are unlikely to give working capital loans to small businesses. Fortunately, you can get a working capital loan from a direct business lender.

Endnote

Many people can get a loan as long as they have the ability to repay it. However, it is a struggle for many small business owners as most banks and other traditional lenders fail to approve their applications, take forever to approve and release loan cash, and when they do, they give unfavorable loan terms. Fortunately, direct lenders approve and release loan cash quickly, and their loan repayment terms are flexible.

When the recent pandemic happened, one area that was notoriously affected was businesses. Restaurants closed down. Airlines ceased from operating. Malls, fashion boutiques, function halls, and beauty salons stopped functioning. Perhaps the only business establishments that stood the awful pandemic predicament were grocery and drug stores.

Fortunately, with the recent development and precautionary measures conducted, the businesses have slowly resumed their operations. But sadly, others have lost so much money that they will need to start from scratch and obtain corporate financing.

Hence, elaborated below are the tips to get a personal loan with the lowest interest rates to help business owners start all over again and regain what was once lost.

Personal Loan Defined

The loan that the business owners will obtain can be a personal loan. It is defined as a type of unsecured loan that will help these entrepreneurs with their financial needs, such as recovering from a terrible loss or survival.

So if you are a business owner, with this type of loan, you will usually not need any collateral or pledge within which to secure your loan. And your lender may provide you the flexibility to utilise the funds or resources according to your needs. However, although you are not obliged to post any security for your loan, you will still need to pay the agreed interest rates, as mentioned in the loan contract.

What is an Interest Rate?

Of course, it is suicide for lenders to lend a loan without imposing any interest rate at all. Interest rates are indispensable in the lending business. Why? Because it is the amount due to the lender. They could not use their money since it was given to someone else like the borrower. Meaning, they could not enjoy and use their cash because they lent and gave it to someone else.

Imposing an interest rate is the remedy to that situation. Thus, an interest rate is an amount proportionate to that borrowed in which the lender charges the debtor and is mostly expressed as an annual percentage.

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How To Find the Lowest Personal Loan Rates

Follow any of these methods, and your business will surely recover and flourish:

1. Maintain a Spotless Credit History

As a business owner, you need to find the lowest interest rate personal loan. Your lenders will assess your credit history before lending you a loan. Thus, you must have maintained as spotless a credit history as possible so they will not hesitate to provide you the funding that you need. But if you have a low credit score, you must improve it to be lent money in no time.

2. Make Inquiries

You must make inquiries and shop around when it comes to looking for the most favourable lender for you. Choosing a lender requires a lot of research and planning to find the lowest interest rate. Ask around. Compare the terms and conditions. And study the rates and repayment schedule fees.

3. Find a Co-signer

You must find a co-signer with an excellent credit history and reliable income when you apply for a personal loan for your business to increase your chances of getting approved at a lower interest rate. The reason is that your co-signer will guarantee the payment of your loan if you miss it. With that, your lenders will not hesitate to approve your loan application because they can run after your co-signer if you do not pay.

Importance of Lower Interest Rates

Indeed, you need lower interest rates for your business needs. Why? The reason is crystal clear. With lower or even flat interest rates, you can quickly obtain corporate funding and other products cheaper than they usually are. It also means that most of your money is applied to the principal instead of the interests when making monthly payments, making it easier for you to pay the whole unpaid obligation.

With lower or even flat interest rates, you can quickly obtain corporate funding and other products cheaper than they usually are.

Corporate Finance Explained

It is common knowledge that businesses need money to earn money, increase their revenues, or recover from a mishap like the pandemic. But because all their business income had been utilised to survive, they would have to seek financing. And that is what corporate finance or funding is all about.

So, what is corporate finance? Corporate finance is akin to corporate funding, which is a means to provide money and resources for businesses. This means that a lending corporation, bank, or partnership involved in lending will provide capital, otherwise known as money, to the business owners for the latter’s survival, business expansion, improvements, or income-generating activities.

In short, corporate financing entities lend money to these business owners or grant loans but with interests for their benefit.

Takeaway

With all these tips and knowledge, you will not find it difficult to bounce back and resume your business. You need only to be determined and strong-willed to thrive again and for your business to thrive even in these difficult times.

Matt Cockayne, CCO of Yapily, outlines what embedded finance is and the role it plays in modern business.

“Embedded finance” could very easily become the next overused hype cycle. Another phrase that gets bandied about, over-hyped by the press and industry talking heads alike, but that ultimately fails to meet the weighted expectations placed on it.

Embedded finance is already happening. And what’s more, it will only continue to improve the experience for both consumers and businesses across multiple industries, not to mention keep the fintech ecosystem growing in the coming years. As with any new concept, however, there are a number of misconceptions surrounding embedded finance - what it is, what it isn’t and the role it will play in the coming years.

What embedded finance is, and isn’t

A decade ago, financial services was an industry in and of itself, along with the likes of education, commerce and healthcare. Fast forward to 2020, and financial services is the ultimate enabler - one that touches almost every single industry as they look to incorporate financial products and services into their native offerings.

More and more we’re seeing non-banking players launch their own financial services to open up new revenue lines and improve customer experience. Apple launched a credit card. Amazon offers loans to merchants who have “stalls” with them online. It’s this native integration of financial services into any non-traditionally financial app or service offering that characterises embedded finance.

Embedded finance in action today

As such, embedded finance can take on myriad forms. The simplest would be your local take-away or pub enabling you to order and pay for your favourite Chinese or tipple online from the comfort of your home. Something many in fact did during lockdown. But it can also go much further. Tesla, for example, offers its own car insurance to would-be EV owners during the sales process itself.

Sticking with insurance, gig-economy workers, like Uber drivers, often need extra insurance beyond their standard cover for when they’re actively working for specific companies. To help bridge that gap, Uber and other companies now provide various levels of cover to the temporary workers they employ. As we see even greater uptake of gig work post Covid, this type of service will only grow.

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Never mind the buzzwords

This is all well and good, though we’ve seen time and again new technologies and trends fail to meet expectations. But embedded finance is here to stay. Not simply because evolving customer expectations and a global pandemic have created the perfect petri dish for a radical reimagining of how and where the key functions of finance are delivered. There’s big money here too - the VC firm Andreessen Horowitz predicts it will increase the profitability of a customer five times over the original revenue stream.

Added to this, while Big Tech is currently leading the way, the most effective way for both banks and other fintechs to survive and emerge as winners in the coming years will be through partnerships. And the success of embedded finance is predicated on developing mutually beneficial partnerships across multiple industries.

As a lender, you can’t embed payments options for your customers online - thereby making it easier and more reliable for them to make repayments and enhancing their overall customer journey with you - without having a solid payments partner. One that has the best technical infrastructure and APIs that you can rely on to provide the quality payments service you want to give customers.

In the coming months and years we will see more partnerships emerge that facilitate embedded finance. Partnerships that will help the fintech ecosystem thrive in the coming months. Opening doors for new technologies, innovations and collaboration at the exact moment when it’s needed.

Some might believe that established businesses do not need financial aid, funding, or loans. The logic is those big companies are wealthy. It may be accurate, but owning stock or assets is not enough. A big company can sell items to inject some cash into their operations. It can apply for bank lines of credit. A working capital loan is the fastest way for a firm to keep things moving. Today, we will discuss this type of corporate loan. We will explain how it works and what corporations can access it.

What is a Working Capital Loan for Corporations?

Corporations use working capital loans to finance everyday operations. It is normal in the current economic landscape and the ongoing global health crisis. They could sell stock or get bank loans to fund investments. As many businesses know, this year was anything but ordinary when it came to daily operations. Even large firms need fast access to cash to pay debts, cover rent, pay employees, etc. A working capital loan is a financial instrument. It helps companies big and small to make it through periods of low business activity.

The definition of a working capital loan is simple. It represents the difference between your current assets and your liabilities. The resources can include accounts receivable, inventory, investment/stock portfolio, etc. The obligations can include owed payments to suppliers, debts, etc.

Most corporations receive unsecured business loans. It means that they are eligible for such funding without collateral. By comparison, small businesses and startups have to present guarantees. Corporations in need of a working capital loan can address a bank, governmental funding, and private lenders.

According to All Year Funding, alternative lenders offer loans to small and big companies alike. They do not push for perfect credit scores and collateral. In this context, startups and larger firms can access merchant cash advances. These types of business loans can quickly cover a company’s needs for money for daily operations. The advantage is that alternative lending works much faster than banks. Large food distributors, supermarket chains, and construction companies have access to loans in a couple of days. The limitation of such a loan is the payment threshold. A company needing a few million dollars should go to another type of lender.

Corporations use working capital loans to finance everyday operations.

Where Can You Secure Corporate Funding for Working Needs?

When it comes to corporate funding, your best bet is the Small Business Administration. Do not let the name fool you. The entity allows you access to loans as high as $5 million. It depends on your working capital needs. Here are some popular SBA working capital loans for corporations:

• Standard 7(a) Loans. A company can get up to $5 million. The maximum guarantee from the SBA for loans up to $150,000 is 85%.
• Working CAPlines. They are revolving lines of credit to finance seasonal or short-term needs.
• International Trade Loans. The maximum SBA guarantee is 90%. The loan works best for companies that need funds for global exports. The maximum loan amount is $5 million.
• Export Working Capital. It provides companies with additional funding to increase domestic export sales. The maximum SBA guarantee is 90%, and the maximum loan amount is $5 million.

Small businesses have their SBA microloans and 7(a) working capital loans to access. They also have private lenders to rely on in emergencies. In comparison, corporations need to meet rigid criteria to access SBA funding. A high credit score and no history of bankruptcy in the past three years are mandatory.

The Pros and Cons of Working Capital Loans for Corporations

Before you jump at the opportunity of accessing working funds through a bank, the SBA, or private lenders, you need to know the pros and cons of this type of loan.

Pros of Working Capital Loans

• It allows businesses to cover all gaps in the working capital expenditures. This way, corporations can keep employees on the roll, pay suppliers, deliver goods, and expand.
• A working capital loan is among the fastest types of loans big businesses can access.
• It does not require any equity transactions. It means that the owners of the company still have full control over their business.
• It is among the most popular business loans in the current health crisis; corporations had to face economic instability and adjust to the present challenges.
• Companies usually take such loans to make ends meet when cyclic businesses are slow. By the time the trade booms again, they already have paid the loan.
• Some types of working capital loans are unsecured, removing the collateral obligation stress.

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Cons of Working Capital Loans

• Working capital loans’ interest rates depend on the lender. Medium and large businesses work with interest rates between 6% and 16%.
• Missed payments on such a loan can lead to disruptions in the company’s credit score.
• Most lenders agree to a loan period of 6-12 months.

Bottom Line

The global economy is taking some hits as of late, and they do not spare medium and large corporations either. Whether your lenders are banks, the SBA programs, or private financial entities, you need to make sure you meet their criteria. Working capital loans are great solutions to keep employees. They allow you to run the business through all your facilities and boost marketing efforts. You have to pick the best conditions for your company and make sure you pay on time.

John Ellmore, Director of KnowYourMoney.co.uk, investigates emerging trends in personal finance and the fintech driving it.

A lot has changed over the past 20 years. We are now living in a world where home assistants and smartphones have become the norm, and as a result of these great leaps in technology, people are increasingly relying on their devices to make their lives easier.

The coronavirus pandemic has only driven the need for such technologies even further. With the implementation of social distancing measures and nationally enforced lockdowns, consumers have seen a complete overhaul to their day-to-day lives. Consequently,  57% of consumers now prefer to use online banking tools to manage their finances; pre-COVID-19, less than half (49%) of consumers preferred online offerings.

With more consumers opting to use online offerings to look after their cash, it’s clear that this change in consumer mentality is here to stay, and it hasn’t just been limited to online banking.

Fintech: Revolutionising Personal Finance

The personal finance industry has come a long way since the turn of the century. Indeed, the rise of financial technology (fintech) has transformed the way in which service providers are able to engage with their customers. In short, fintech has simplified the complicated personal finance industry, making it far more accessible for the average consumer.

One factor which has been instrumental to such changes is the rise of comparison websites.

The previous two decades have seen a growing number of consumers relying on comparison websites to save money on everything from their car insurance to credit cards. And it seems that the popularity of comparison websites will not falter any time soon, with research from the Competition and Markets Authority revealing that 85% of UK consumers have used price comparison websites at some point in their lives.

The previous two decades have seen a growing number of consumers relying on comparison websites to save money on everything from their car insurance to credit cards.

So, what exactly has driven the popularity of comparison websites? Put simply, they take the effort out of researching and comparing financial options. By gathering all of the data and consolidating the available options in a clear and concise list, consumers have been able to investigate their choices without conducting hours of monotonous research.

However, it is fair to say that this this offering is in a constant state of change, and we are seeing the fintech industry adopting highly complex algorithms at a rapid pace. As these algorithms are now able to make rapid assessments of risk using an individual’s financial data, it is now possible for comparison websites to offer more targeted results. Consequently, the personal finance industry creating a more tailored, personalised service for consumers.

Advancements in Digital Banking

The growing popularity of comparison websites has been complemented by the rise of online banking. Indeed, consumers are now looking for convenient digital offerings from their banking provider, be it an established high street bank or a virtual challenger bank.

Consumers now demand easily accessible and user-friendly online platforms to make the management of their personal finances a far more streamlined. So, by offering smart analytics, user-friendly app designs and real-time payment notifications, banks have made it easy for consumers to always be aware of their outgoings and any fraudulent activity in their accounts. With saving made easier and safer than ever, now consumers can watch their wallets without ever having to leave the house.

It is clear that technology is playing an increasingly large role in the way we handle our finances, and the sector is primed for further innovation yet. So, with many useful developments in the pipeline, what does the future hold for the personal finance industry?

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A Personalised Experience

Traditionally, most consumers would assume that one could only receive personalised, tailored advice with the help of a human adviser. However, the future is digital, and such regulated advisers could soon take the form of digital chatbots, or “robo-advisers”, powered by artificial intelligence (AI).

At present, such customer-facing technology does exist, but is still in the very early stages of its development. Indeed, such “bots” are only able to provide generic guidance to basic consumer queries. However, at the current pace of AI developments, it’s likely that further industry disruption is on the horizon.

Whilst it is unclear exactly when such advancements will be ready for consumers to use, it is plain to see that the technology will inevitably be used to drive the personalisation of the personal finance sector. I predict that in the coming years, we will soon see a new generation of empowered consumers who are able to take advantage of the greater choices, transparency and hassle-free experience driven by the ‘fintech revolution’.

Ultimately, the days of one-size-fits-all advice are numbered. The modern consumer should expect a streamlined process, which not only offers a wide variety of products to choose from, but also is tailored to their specific needs. What’s more, they should expect providers to act upon their decision immediately. Whilst humans can offer this service to an extent, only technology can offer such a sophisticated service to the masses.

Naturally, this will have a knock-on effect on the way consumers handle their finances, and savers should be on the lookout for new innovations that might help them better manage their money in the years to come.

Katya Batchelor, banking and finance lawyer at Thomson Snell & Passmore, explains the consequences of the LIBOR transition and how firms can ensure they are prepared for it.

Despite the disruption caused by the COVID-19 pandemic, the regulators of the financial sector continue to focus on phasing out LIBOR and the deadline of the end of 2021 has not changed. After this date firms cannot rely on LIBOR being published, and whilst it may seem far away, the far-reaching scope and scale of the transition cannot be underestimated. To support the Risk-Free Rate (RFR) transition in sterling markets, the Bank of England began publishing the Sterling Overnight Index Average (SONIA) Compounded Index, a Risk-Free Rate that had been chosen to replace LIBOR in the sterling market, from 3 August 2020.

LIBOR is all-pervasive in many businesses. The LIBOR benchmark is used in a variety of commercial scenarios, including as a discount factor or reference rate in commercial contracts. LIBOR is also widely used as the reference rate for intra-group lending arrangements.

How do LIBOR and SONIA differ?

There are a number of significant differences between SONIA and LIBOR and the differences will impact the way firms manage their risk. LIBOR is a forward-looking term rate, which means that the rate of interest is fixed at the beginning of each interest period and is quoted for a range of different maturities. This method provides borrowers with advance visibility as to their financing costs. SONIA measures the average rates paid on overnight unsecured wholesale funds, denominated in sterling. It is, therefore, a backward-looking overnight rate, based on real transactions, with the interest rate being determined and published after the period. Compounding is done in arrears, which means that the borrower only knows at the end of the interest period how much interest it has to pay.

There are a number of significant differences between SONIA and LIBOR and the differences will impact the way firms manage their risk.

Borrowers are likely to face operational challenges if they lack certainty as to what payments need to be lined up in advance of the interest payment date. Market participants are actively looking for a satisfactory solution to this challenge as there may now need to be a distinction between an interest period and a payment date, or period to allow time to arrange payment. In order to provide some forward visibility, the parties may choose to start the reference period for the interest rate calculations several business days before the beginning of, and end several business days before the end of, the relevant payment period. Alternatively, parties may fix the rate a few days before the end of the interest period. In addition, borrowers may need to hold additional cash to cover any potential interest rate movements during an interest period, impacting the internal cash management processes.

Key challenges for lenders and borrowers

Both lenders and borrowers are facing deadlines and challenges, the most important of which is the establishment of market conventions for calculating SONIA compounded in arrears. We have seen some development of tentative standardised documentation – a welcome step. Current recommendations from the Working Group on Sterling Risk-Free Reference Rates state that clear contractual arrangements should be included in all new and refinanced LIBOR-referencing loans to facilitate conversion, through agreed conversion mechanisms or an agreed process for renegotiation to SONIA, or other alternatives. Of course, both lenders and borrowers seek certainty in their arrangements, and the greatest certainty can be achieved by setting out in advance the terms of conversion at a future date.

As always it is essential to keep the lines of communication open between the counterparties, especially when any legacy contracts (existing contracts that do not mature until after the end of 2021) are dealt with.

The importance of due diligence

The process of transitioning for firms is likely to start with a large-scale due diligence exercise. All existing and new documents that include LIBOR provisions need to be reviewed in order to determine what fall-back language is used if a benchmark rate ceases to become available. The changeover from LIBOR to SONIA or to any other alternative rate is likely to impact a number of provisions in facility documents (and documents that are “grouped” with them, like ISDA master agreements or any intra-group funding arrangements), not just the interest calculation. Those include interest payment provisions, payment and repayment dates, break costs and others.

All existing and new documents that include LIBOR provisions need to be reviewed in order to determine what fall-back language is used if a benchmark rate ceases to become available.

A SONIA loan (or any other RFR based loan) does not need any particular interest period selection. Selection of interest periods drives frequency of interest payments to be made and the duration of the compounding period: the longer the period, the more compounding there is.

The parties might want to revisit the prepayment and break costs clauses. Where the loan is not priced against a term benchmark, the arguments for break funding costs are more difficult to articulate. However, a bank receiving an unanticipated prepayment may still look to recover an amount reflecting its shortfall on redeployment of funds.

Looking to the future

There is a real possibility that financial markets will evolve significantly over the next few years and so firms may want to transition to another alternate benchmark as the new financial products and markets become established. Therefore “replacement of screen rate” clauses in new and revised documentation should follow the market standard but allow for any flexibility required by the parties). Also, consider the triggers for applying the new rate. For example, should a new rate apply only if LIBOR is discontinued or should it also apply if some form of LIBOR continues to be published but on a different basis?

Complex financings involve multitudes of different parties and interests so it is important to be aware well in advance what involvement and consents are required; intercreditor agreements often contain restrictions so that the consent of another group of creditors is required to any amendments relating to the interest calculation and payment provisions.

It is essential to be mindful that the transition may result in accounting and tax issues. These may arise because of the uncertainty in the period leading up to the replacement and from the replacement rates themselves. When amending existing facility documentation, lenders particularly must be mindful of their regulatory obligations.

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In addition to legacy loans the working group identified a narrow pool of “tough legacy” contracts that cannot transition from LIBOR. The working group defines tough legacy contracts as those which do not have robust fallbacks for replacement of screen rates and are unable to be amended ahead of LIBOR discontinuation. It strongly suggests a legislative route for dealing with such contracts.

The regulator has also identified that certain type of borrowers will ultimately require a forward-looking rate. However, the current understanding between market participants is that such forward-looking term rates may not be available until relatively late in transition process, if at all.

As the end of 2021 is looming, firms must start to prepare to transition away from LIBOR as soon as possible. We recommend conducting a thorough due diligence exercise on all relevant documents to identify the scope of the project and then holding discussions and making a plan for transition with all relevant counterparties. Internally, organisations need to identify systems and processes that need changing and understand how the change will impact them economically and from an accounting and tax perspective. Implementation may be complicated and have far-reaching consequences and it would be sensible to start the process of transition with plenty of time left.

For many years now, an increasing percentage of consumers have transitioned to using debit cards rather than cash. Many projections state that of all global currency, only 8% of it is physical currency, which shows just how prevalent and important the likes of credit and debit cards are to global economies. 

Credit and debit card use is much more widespread than before, with users citing added convenience and time saving as major reasons, yet in 2020, COVID-19 has provided another reason for both customers and businesses to embrace cashless trading. By walking into essentially any store on the high street, you will likely find signs banning every transaction other than contactless payments, which shows that COVID-19 is accelerating society towards this cashless revolution. 

Since the pandemic, many stores have opted for a cashless policy, whilst cash machine withdrawals have fallen by 55%. Due to the uncertainty surrounding COVID-19 and a potential second wave, this trend looks set to continue. Below, Southern Finance's Tom Simpkins explores the pros and cons of a business going cashless during the COVID-19 crisis, as well as what advantages going cashless may have for everyone after COVID-19.

Saving Time and Money

Just as many adhered to the paperless revolution a decade ago, deciding to go completely cashless removes the need for expensive equipment that would have once been considered essential. Shops would have little to no need for tills, nor would the likes of safes be standard when all transactions would be handled electronically.

Deciding to go cashless may save time, money and effort in the long run, especially as it looks like it may be becoming the new standard. After all, the beginning of the UK’s lockdown in March saw the use of physical currency in stores drop by approximately 50%, and with lockdown measures fluctuating, the rest of the country is seeing little reason to return to relying on physical cash.

Deciding to go cashless may save time, money and effort in the long run, especially as it looks like it may be becoming the new standard.

‘Staying ahead of the curve’ is always a wise move, especially if you’re trying to get a one-up over your competition. By embracing the new standard in an ever-growing cashless society, you can adjust to the new challenges that it brings, such as a focus on convenient technology. An example of this would be to invest in contactless payment points, digital tablets, and other equipment that can make life easier for customers and workers in almost any industry, ranging from the restaurant industry to retail.

Increasing Business Efficiency

Cashless transactions aren’t just efficient due to saving time counting out physical currency, it also promotes smoother transactions for businesses in general. By primarily dealing with cashless transactions, businesses will have less stress handling physical currency, such as handling bank deposits or concern over germs. Proof of this latter point was seen in China during the early lockdown efforts, as thousands of banknotes were destroyed from fear of being contaminated.

Certain businesses and industries such as those that specialise in transportation have already seen a boost in efficiency, so much so that it feels like there’s no going back from cashless for them. A prime example of this would be buses, as before COVID-19 there were various pushes to encourage using contactless card payments as opposed to paying in cash, yet now that necessity demands contactless payments this push has become much more important.

As to be expected, cashless transactions are also much more convenient for customers, thanks in no small part to the abundance of digital wallets available. Along with credit and debit cards, most smartphones are capable of being connected to bank accounts and serving as digital cards; the likes of Apple Pay and Google Pay are already immensely popular. By being able to make a payment by placing a phone against a card reader, customers can make everyday transactions quicker than conventional methods, like fishing out a credit card.

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Vulnerabilities with Banking Issues

Of course, no system is perfect, and some raise large concerns with a truly cashless society. From a reluctance to adapt to a cashless society to concerns with banking security, going completely cashless requires plenty of willing participants. While we’ll likely never see a day where physical currency is worthless, many are still confident in its staying power, along with the sense of security that physically holding currency provides.

Resistance to a cashless society isn’t new to the COVID-19 crisis, as the Access to Cash Review once called on the government and lawmakers to stop shops offering cashback, especially when the request was made without making a purchase. This continued push has persisted even to 2020, with the government’s budget in March detailing further protection for those that want reliable access to cash. Just as some don’t wish for a cashless society, many still rely on cash and face-to-face banking.

There’s also the age-old problem of disclosing too much information, as many fear that cashless transactions risk their banking information being stolen. Experts in the financial industry are attempting to address this issue, such as fintechs, who strive to assist electronic payments without the use of bank accounts. The truth is that when using cash, you don’t often grant the opportunity to access your banking details, and even the possibility of that happening is enough to put many people off the notion of a cashless society.

Is the Future Cashless?

While arguments can be made both in favour of and against a truly cashless society, COVID=19 has made it clear that many businesses can either thrive from it or need to go cashless to survive. The amount we rely on cashless transactions, as well as how common they become, may depend on how quickly we can handle and eliminate COVID-19, yet it’s becoming likelier by the day that the pandemic's impact will be long-lasting, if not felt forever. 

Whether this extends to being a completely cashless society or not is yet to be seen, but for now it’s clear that during a pandemic and the lockdown going cashless is a safe move, no matter what industry it’s utilised in.

Credit report errors can negatively affect you in many ways, but generally, they drag your credit score down. What’s more, your credit report measures your financial health. To prevent financial challenges from happening, you may want to request a copy of your credit report now, and see whether the following errors exist.

1. Personal Information Errors

There are times when credit bureaus confuse one consumer with someone else or when credit reports list incorrect addresses. These incidents are primarily caused by identity or personal information errors. Here are some of the most common identity errors that you should look out for:

• Incorrect name
• Misspelling of your name
• Incorrect middle initial
• Incorrect contact information (e.g., phone number and address)

Your basic personal facts should always be updated whenever you move to another house, change your name, or use a new phone number. If you recently filed a divorce and have joint accounts with your former spouse, remove your name from these accounts to avoid suffering from incurring debts in the future.

2. Mistaken Accounts

Audit the number of open accounts recorded in your credit report. There are situations when a retail credit card or loan may be opened under your name, but you actually were not involved. It may happen due to clerical error or identity theft.

Clerical errors take place when another consumer coincidentally has the same name as yours. You’ll notice these errors easily when someone else’s information appears on your report. These errors can negatively affect your credit utilization ratio and credit rating, so you’d want to update your creditor right away.

Clerical errors take place when another consumer coincidentally has the same name as yours.

These unfamiliar accounts could also indicate that somebody deliberately stole your identity, either through your name or social security number. If you think you’re a victim of identity theft, give your creditor a ring as soon as possible. Recovering from the damage caused by this theft requires a long and complex process. It’s best to catch the thief right away and mitigate its potential financial and legal risks.

3. Account Reporting Errors

Errors may happen in the actual status of your accounts, too. Among all these inaccuracies, missed and late payment dates are one of the most alarming. If taken for granted, you may end up defaulting on your payments. Even worse, these errors can cut back your credit rating significantly.

Below are the most common errors that could happen in your account:

• An opened account is reported closed, or vice versa
• Timely account payments are reported late or delinquent
• Incorrect dates of late payments
• Incorrect dates on opening or closing an account
• Incorrect balance
• Incorrect credit limit
• A consumer is listed as a primary account holder rather than an authorized user, or vice versa
• Seven-year-long debts or older (Note: Discharged debts should be removed from your credit report, but bankruptcy will be reported.)

More importantly, your credit will be highly impacted if your closed accounts aren’t labeled properly and accordingly. You’ll know you’re badly affected once you get your credit score and see that your creditworthiness turns poor. With this in mind, these accounting errors should all be disputed before they end up negatively influencing your credit.

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Steps in Disputing Credit Report Errors

Under the Fair Credit Reporting Act (FCRA), both information providers and credit reporting agencies share similar responsibilities in correcting inaccurate information in your credit report. However, the stepping stone in disputing errors in your credit reports starts with you.

According to the FTC, you should take the following steps:

1. Request copies of your credit report.
2. Determine the errors in your credit report.
3. Confirm these with your furnisher/s (e.g., your bank or a utility company)
4. Write a dispute letter to credit bureaus, informing them about the letters. Append “copies” (not the original copies) of your report with highlighted errors and materials that support your position. Keep copies of everything you send.
5. Within 30 days, call credit reporting agencies, follow-up your dispute, and ask what action they’ve taken. (Investigation usually takes less than a month.)

In a nutshell, you have to reach two key contacts to resolve this credit report error issue effectively. Correct the inaccurate information at the credit reporting agencies or credit bureaus (e.g., Equifax, Experian, or TransUnion) and with your creditor or furnisher.

Takeaway

Everyone wants to have a stellar credit score. That’s why we keep making timely payments, having a solid combination of credit, and strategically maintaining a low credit usage. All of these will go to waste once a credit report error is neglected. Hence, you should  keep close tabs on your credit reports and dispute inaccurate information at once.

But while cashback and reward cards give you the chance to get a percentage of what you spend back, you really need to do your homework before applying. You can apply for a credit card in many ways: you can use a comparison site, apply online, by post, over the phone or at a bank or building society. Below, Sarah Henshaw of Must Compare discusses why caution is necessary.

Firstly, with economies struggling around the globe and many nations already in recession, you should think twice before applying for any credit card. This is especially true if your job or income is looking precarious, or you're going to struggle covering your bills as a result of the current coronavirus crisis. Higher than usual interest rates mean these credit cards are generally best suited to customers who will pay the entire balance off in full every month. The moment you fall behind, the interest incurred on any remaining debt may start cancelling out the rewards you’ve earned. Plus, by dangling incentives to use your card, you’re more likely to ‘justify’ splurging on items you might otherwise have had the self-control to resist. If you’re trying to economise in this crisis, you’ll need to have the willpower to capitalise on cashback opportunities without falling into an over-spending trap.

Secondly, bear in mind that you’re cooped up at home right now, with limited access to high street shops. Although cashback on what you spend at the till might sound tantalising, if it’s not with a retailer you’d ordinarily visit, or you might not even be allowed to under lockdown rules, you're going to be waiting a while before reaping the benefits. Online shopping, unlike groceries and travel, doesn't generally yield the best perks on reward credit cards, so if your plan is to use it from your sofa make sure it’s fit for purpose first by looking at the small print.

If you’re trying to economise in this crisis, you’ll need to have the willpower to capitalise on cashback opportunities without falling into an over-spending trap.

When looking into getting a credit card, it is important to know the exact requirements needed to apply. Some card companies have been tightening their criteria due to COVID-19 and the new risks it poses, however many won’t announce any changes, so this will be another factor to look into.

If staying at home is giving you itchy feet, and you’re looking to stockpile travel points through your rewards credit card, bear in mind many hotels, airlines and cruise companies will be suffering at present. While this doesn't mean they won’t bounce back once movement rules are lifted, it could see some adjust their frequent traveller programmes and loyalty schemes to ride out the worst of it. You don’t want to be stuck with a pile of points you can’t use! Especially with the new updates on what countries you can and can’t go to without self-isolating for 14 days when you return. Remember, too, that once you've accrued them some rewards will have an expiration date. Another thing to check out before applying.

As well as the type of rewards on offer and where you can accrue them, there are countless other factors to look at when comparing cashback credit cards. Some providers offer a sign-up bonus that can boost your rewards – while others might charge a sign-up fee, uncompetitive interest rates, or an upper limit on the amount of cashback you can earn, which could make attractive headline ‘deals’ look altogether less appealing once you’ve read the T&Cs. Some cashback and reward credit cards come with minimum spending quotas before you're allowed to cash in your points, others have tough application criteria which, if you’re refused, could impact negatively on your credit score.

Additional support packages have been setup during this time of crisis, such as pay freezes on UK loans and credit cards, which aim to help people who are in debt and experiencing financial struggles due to COVID-19. The FCA (Financial Conduct Authority) have awarded those who have lost their jobs, or are receiving less income, with what they call ‘breathing spaces’ that allow them to request up to £500 overdraft for three months free of interest, or request a payment freeze. Make sure you keep up to date with these support offers as at the moment of writing this, customers have until the 31^st October 2020 to apply. Many other sites have been covering the updates on financial help available, so it’s good to research your options.

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There are many websites that you are able to use to compare cashback and reward credit cards. Most will show you a wide range of cards available, from ones that pay a flat rate of cashback, to those offering different rates depending on how much you spend or where you shop. By looking at a big sample you should be able to better identify the card that’s best suited to your current spending habits or future needs.

It helps to have a goal in mind. Is there something that you are saving for? Selecting the right card for your goal can help you reach it quicker. Whether it is a 2021 luxury holiday that air miles can help you out with, or an all-out Christmas lunch with the family, you need to think about your goal and choose the best card for you.

If you’re still not sure whether reward and cashback credit cards are right for you, you can find more information about how they work, how to make the most of them and some common pitfalls online. You can also view information and advice on how to choose the right card and what to consider when applying in more detail. These cards can be a great way of making your money work harder but can equally turn into a real headache if they’re not used wisely. Always do the research first and you should reap the rewards as a result. If you are feeling financially worried or vulnerable, make sure you contact your card provider as they may be able to assist you.

Unfortunately, it appears that an oncoming recession is unavoidable. Recent figures have shown that the UK economy shrunk by 19% between March and May. Given that the UK went into lockdown in mid-March, this result is not exactly unexpected, but the personal finances of many consumers will still feel painfully strained – recent research from KnowYourMoney.co.uk shows that almost a third (31%) of UK adults have seen their income decline as a consequence of the coronavirus pandemic.

However, it is possible for consumers to regain control over their finances.  What’s more, it is actually simpler than many assume. John Ellmore, Director of KnowYourMoney.co.uk, outlines the necessary steps below.

A review of financial health

To gain a comprehensive understanding of one’s financial health, a thorough audit of finances is vital.

The best place to start is by reviewing bank statements and making a note of all incomings and outgoings. Though it may seem simplistic, it is a crucial tactic in identifying and eliminating problematic spending. For example, more than a fifth (23%) of UK adults were guilty of overspending during the lockdown period, but many might not realise they are spending so much. Taking note of such spending will help consumers to acknowledge such overspending and cut it out.

A financial audit could also encourage consumers to shop around for better deals on a variety of products, from groceries to home insurance. So many consumers fail to shop around for a better deal – 12.9 million consumers automatically renew their home insurance without investigating alternative suppliers, for instance – and consequently miss out on savings. Comparison sites are a great place to start; they save consumers time by searching the internet for numerous providers and present them clearly to consumers. All they need to do is choose an option that best suits their needs.

To gain a comprehensive understanding of one’s financial health, a thorough audit of finances is vital.

Protecting credit scores

Credit markets tighten during recessions, which means it can be harder for consumers with a less than desirable credit score to successfully apply for a mortgage, loan or credit card.

However, it is possible to strengthen your score even in a tough economic climate. The best method to improve credit scores is to keep up with regular debt repayments, such as credit cards and utility bills.

That said, there may be times where finances are particularly tight and with larger repayments, such as mortgages, it can be difficult to keep up with regular repayments. If this is the case, consumers should consider speaking to their provider about a mortgage holiday, or temporarily making interest-only repayments. These options could reduce monthly household bills and offer consumers some financial breathing space. However, consumers should always consult with their provider before choosing these options, as they could negatively impact their credit score. These options can also result in people paying more in the long-term.

Start an emergency fund

Perhaps the most important course of action is to start an emergency fund. Usually containing between three to six months' salary, this fund can offer a financial cushion should consumers suddenly find themselves being made redundant.

The best type of accounts for these funds are usually easy access savings accounts. They enable savers to instantly access their money when they need it, without any charges or losing interest. These accounts don’t usually offer competitive interest rates, but some can offer over 1%, so consumers should conduct thorough research before they choose an account.

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An important element of building an emergency fund is consistently saving – after all, 28% of consumers were guilty of not saving enough money during lockdown, according to our research. So, consumers should try to set up a direct debit between their current account and savings account, making it easier to keep money to one side.

Additionally, some banks give customers the option to round up on purchases, and place the difference in their savings account; for example, if a customer bought a T-shirt for £14.20, they have the option to round the price up to £15, and place the extra 80p into their savings.

Ask for help 

Consumers must always remember that help is available if they find the financial burden too much. If it’s financial help they need, there are various schemes, such as mortgage help schemes, that can off assistance. Alternatively, debt charities such as StepChange can offer invaluable emotional support and help consumers get their lives back on track.

Financial management can seem overwhelming at the best of times; however financial anxiety has been amplified in the wake of the coronavirus. However, it is vital that consumers don’t panic. By taking simple steps, consumers can work to protect their finances against recession, and give themselves some much-needed peace of mind.

The coronavirus outbreak has waylaid the best-made plans for the finances of many people, so successfully managing your money through 2020 is now looking to be much trickier than it was before. However, many of the same principles still apply. 

Whether it's saving for a rainy day or creating a budget to help you take control of where your money is going, managing your finances will help you stay on top of your bills and create a financial cushion for your future. You can start taking steps to become more financially literate at any time, so this guide will provide you with some tips on how to manage your money effectively in 2020.

Learn how to budget

Whether you choose to write out your budget with a pen and paper or you prefer to go digital and use a spreadsheet or an app, having a budget in place each month is vital to managing your money efficiently. Budgeting is a great way of seeing clearly what you have coming in and going out, so you can see if you’re overspending in a certain area and redirect that money to savings or debt payments. 

Pay off your debts

Many people have additional payments to make each month in the form of loans or cards, so you should make 2020 the year that you tackle your debts. It makes sense to pay off the debts which charge the highest rate of interest first, and then pay off the rest afterwards. Some examples of debts you should look to pay off include credit cards, store cards which typically have a very high rate of interest, and personal loans. 

It makes sense to pay off the debts which charge the highest rate of interest first, and then pay off the rest afterwards.

A good tip if you have a few debts is to list out all of the loans or cards you have, along with the minimum payments you need to make as per the terms of your agreement, and the interest rate. You can then categorise these from highest to lowest, so you have a clear view of what needs to be paid. 

Monitor your credit rating

If you haven’t been checking your credit score on a regular basis, this is the year to start that habit. You can use online tools to get a free credit report that will show you any errors or potential fraud that you may be victim too, as well as give you a good overview of your finances. It’s important to have a good credit rating for larger future purchases such as a mortgage on a property, so it pays to check in every so often and see how you’re performing. 

Consider your retirement

So many of us push the idea of saving for retirement to the bottom of our priority list because if feels like such a distant problem. But you can never start saving too early and having a plan in place from an early age will provide you with greater security when the time comes to leave your career. 

Pension specialists Reeves Financial point out that "no matter how old you are it is never too late to think about financially planning for your retirement and paying into a pension scheme. It is actually a tax-efficient way of saving money”. So, if you’re currently without a pension plan, now is the time to do your research and set one up so you can begin preparing for the future.

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Set up a savings goal

Some people can find it difficult to get motivated by savings, and it’s understandable – there are often things we want or need to spend our money on more immediately. But it’s often easier if you set a goal so you know what you’re working towards. The first step with any savings plan is to have emergency savings in place – money set aside should something happen out of the blue, such as your car breaking down or if your boiler breaks. 

Aim to have two to three months’ worth of expenses set aside in an easy-to-access account for these moments. After you have that saved, you can think about longer-term goals you may have, such as taking a holiday, planning for extra money to have on hand when you have a child or for a wedding. You’ll be surprised how quickly your money piles up, even if you just save £50 a month towards your goals. 

Final thoughts

It can be all too easy to bury your head in the sand when it comes to money, particularly if you’re worried about your finances. But having control over your money and how you manage it is the best solution to help you tackle your worries head-on and plan for the future. With these tips, you’ll be in a great position by the end of the year to feel more financially secure and able to start building your nest egg.

The coronavirus pandemic has left many businesses scrambling to adapt. The lockdown and social distancing measures now in place – likely to remain in place, in one form or another, for many months to come – are forcing organisations of all sizes and sectors to reconsider how they operate. Ammar Akhtar, co-founder and CEO of Yobota, shares his thoughts on what the newly adapted financial sector might look like.

As we so often hear, we must prepare for a “new normal”; a world where office working, unrestricted travel and regular visits to bricks-and-mortar premises for essential services is going to become increasingly rare. In short, the transition from physical to digital is being greatly accelerated.

In the finance industry, there is a huge amount at stake. Firms that are unable to deliver their services while the physical world is largely closed off from us are at risk of being left behind by their competitors.

Rising to this challenge invariably means turning to technology. Indeed, fintech has been championed as the future of the finance sector for a decade now, but it has taken COVID-19 to bring about a “fintech revolution” in any meaningful sense.

What will this ‘revolution’ look like?

The increasing prevalence of financial technologies has been a common subject in both consumer and business contexts for many years. The so-called fintech revolution promised open access to data, hassle-free banking experiences and fairer deals for customers.

Yet only relatively small steps have been taken towards this vision. Until now we have only really witnessed a cautious adoption of this technology as consumers, regulators and established banks became familiar with what it can enable – and this has still come at considerable investment.

The so-called fintech revolution promised open access to data, hassle-free banking experiences and fairer deals for customers.

Now, though, things are finally changing. Technology is now not just a competitive advantage for financial services firms; it is essential to their very existence.

Today, people must be able to access critical financial services digitally. From taking out a new product (a loan or a credit card, for example) through to managing their finances and receiving advice, this must all be possible from within one’s own home. But more than that, the process of doing so must be fast, painless and personalised as possible.

There are credit marketplaces in the UK which already offer pre-approved loans that can be opened in just a few minutes with minimal clicks. This is possible because the lenders have made progressive choices in the way they develop or utilise technology.

Conversely, many finance companies still have data, systems and processes that are completely reliant on legacy technologies and on-premise servers. Simply put, these firms are under threat of becoming the Blockbuster or Kodak of the financial services sector (that is to say, businesses that were far too slow to respond to technological change).

Interoperability and the cloud

For financial technologies to be successful, two things are essential: interoperability and cloud computing.

Over the past decade firms have too often taken a piecemeal approach to adopting fintech; they have deployed specific technologies to solve isolated problems. That is because fintechs – financial technology startups – are typically created with that very focused mindset.

For financial services companies, particularly banking providers, a much broader perspective is required. Not only must each element of a business’ operations be built around best in class technology, but the technology must also be interoperable – it must fit together to form entire systems and processes that work seamlessly together.

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Take the example of someone applying for a credit card – something that is increasingly common as a result of the economic hardship brought about by COVID-19. There are various different stages that an applicant will need to pass through – identity verification; credit scoring; advice or product recommendation; application and assessment; and, if successful, creating the account.

Using interoperable fintechs on a cloud-based platform removes time, complexity and human interference in all of those processes. Data can be rapidly shared and analysed, allowing for the appropriate products – better yet, personalised products – to be shown to the user. There is no reason that an applicant cannot go from the start of the process to the end by themselves in minimal time; so long as the credit card provider invests in the technology that enable them to do so.

Embracing fintech to its fullest

We are in the midst of what, in ‘business speak’, they would call a paradigm shift. We are moving past the stage of thinking about financial technology as simply being a means of checking one’s account or transferring someone money. The fintech revolution is gathering speed, and it will lead us to a more open, connected form of banking where one can see and manage all their finances digitally, as well as accessing personalised advice and products all from the comfort of their sofa.

In this primarily digital landscape, financial services firms who cannot deliver an exceptional level of service to customers – be it consumers or business – risk losing them to those who can. Now is the time for the sector to embrace fintech to its fullest and build systems that are not just adapted to the new normal, but actually help to shape it.