So when exactly was the first business loan executed? Not a question that comes up frequently, but an interesting one to consider…Today commercial lending is quite commonplace, with thousands of such business deals transacted every day around the world. We thought we'd take a look back and see how the business of commercial lending got started and how consequently, it has evolved throughout history.
The very first evidence of any kind that we have suggesting that a "business" loan did exist is back around 2000 BCE. These ostensibly were given to farmers in the form of seeds. In other words, they were given the seeds to plant in return for payment at a later date—generally in the form of a portion of said crop. This arrangement was also common with animals used as the method of exchange.
In Mesopotamia around this time, the temples became the sites of various transactions resembling business loans. It's been discovered that they also instituted interest rates during this era. According to the Code of Hammurabi, based upon the set price of silver, the interest could be charged accordingly.
Ancient Greece
Ancient Greece has certainly given us a lot by way of art and culture—and commercial lending is also part of what we have learned from the traditions of the ancient Greeks. Pawnbrokers would lend money to those who needed it and in return, the customer would leave collateral behind to secure the money given. This is something that is still common practice today and when applying for a business loan, very often companies will have to secure it with some form of collateral.
Middle Ages
The Middle Ages represented a period dominated by religious influence. As such, lending was generally banned. Both the Christian bible and the Qur'an forbade such practices. The Torah, however, allowed for lending. Thus the Jewish people became the only ones who could lend money. Some contend that this is what led to their persecution. And yet over time, the importance of money lending has become an undeniable fact.
Industrial Revolution
During the 18th century, while collateral was still a factor, there was also the rise of indentured loans. In this type of scenario, the rich lent to the poor and in turn, the borrower was required to work off the debt.
We also see during this period the rise of centralized banking. International trade, therefore, grew as did business around the world. Loans became more accessible to the average business owner. And in 1816 in Philadelphia, the US got its very first savings and loan bank.
Mid-20th Century
As things progressed in the world of business financing, the middle part of the twentieth century saw another innovation that drastically altered how people banked. The credit card was introduced. In 1950, a Diners Club card was utilized for the first time. The Bank of America would follow suit a few years later with what we now know as a VISA card.
1980's
With the advent of the computer, things started to get a lot easier in the savings and loan industry. Paperwork has become more cumbersome, an explosion in the number of loans given, the necessity of more complex tracking systems—the computer did come just in time. In 1985 Quicken Loans was among the first to offer the application process online. And by 1999, online banking became a regular staple around the world.
Alternative Lending
In the present day, technology has made lending money to businesses easier than ever. And with this major leap forward, the rise of the alternative and online lender has come to redefine the landscape of business loans. Now small businesses who might otherwise have no option, can turn to an online lender and simply skip the banks altogether. A few alternative lending pioneers paved the way in the first part of the twenty-first century and since then so many other lenders have caught on.
The Future
So what does the future of business lending look like? Perhaps an even more streamlined process awaits as technology ever continues to develop. Although the process we currently have in place is pretty easy, not to mention fast! First Union Lending offers everything from business lines of credit to merchant cash advances to equipment financing and so much more. And with loan products ranging from 5k to 10 million, we have the resources readily available to help your small business. The process is simple: fill out an online application, submit a few documents and an advisor walks you through the rest. Clients generally receive the cash in their accounts in 24 hours. So if you're ready for a business loan, we're ready to help. Let's talk about your options!