Business Funding from Banks vs Funding Fintechs: Comparing Processes and Requirements

When a business needs additional business funding, banks are no longer the only option. The growth of funding fintech has given businesses more ways to secure business funding that matches their needs and stage of growth.

Although both channel loans, banks and funding fintech have quite different sources of funds, processes, and requirements. Understanding these differences is important so business owners can choose the funding path that best suits their business needs and conditions.

Different Funding Sources and Financing Limits

Banks obtain their sources of funds from savings, deposits, and owner capital, while funding fintech generally relies on investors willing to channel capital to borrowers.

These differences in funding sources also affect the financing limits that can be offered. The amount of business funding provided by banks is generally larger than the funds distributed through funding fintechs.

Differences in the Application Process

Applying for business funding through a bank generally requires more extensive documentation and a longer verification process, depending on the financing limit and the level of prudence applied by banking institutions.

Funding fintech, on the other hand, is designed to cut through the bureaucracy typically found in conventional banking processes. Applications are usually submitted through an app or website, with credit analysis relying on technology such as artificial intelligence and big data to speed up approval decisions.

Requirements to Prepare

Both banks and legal fintech lenders require identification documents such as an e-ID card (e-KTP) and Taxpayer Identification Number (NPWP), as well as supporting financial documents such as bank statements or business financial statements. Fintech lenders also generally check borrowers' credit history through SLIK OJK, similar to the process used by banks.

The difference is that documents and administrative requirements at conventional banks tend to be more complicated and more numerous than those at funding fintech, which makes the process feel lighter for MSMEs applying for business funding for the first time.

Comparing Interest Rates

Interest rates for business funding through funding fintech vary depending on the platform and the borrower's risk profile. As an illustration, several funding fintech providers registered with OJK offer business funding loan interest starting from 0.75%–1.67% flat per month, with an additional credit approval fee of around 2–4% of the approved ceiling.

Bank loan interest rates for business funding are generally lower, although the disbursement process tends to take longer. Business owners need to consider not only the interest rate, but also how urgent the need for funds is and the size of the ceiling required.

Ensuring Legality Before Applying for Business Funding

One important step before choosing a funding fintech is to ensure that the provider is officially registered and licensed by OJK and is a member of the Indonesian Joint Funding Fintech Association (AFPI). Legal funding fintechs are subject to OJK regulations, required to maintain a certain level of paid-up capital, and regularly supervised, unlike illegal online lending platforms that often target urgent funding needs with significantly higher interest rates.

Ultimately, there is no single answer as to which is better between banks or funding fintech for business funding. Banks tend to be suitable for businesses that need large ceilings and are ready for a longer administrative process, while funding fintech is more relevant for MSMEs that need a faster process with more measurable funding needs.