Finance Business Loans

Finance Business Loans

Drawbacks Of Traditional Loan System

Financing for business has always been a major barrier for many small businesses. This is one of the reasons for most disturbing failures faced by new businesses. These failures are mainly because of many hurdles in the traditional finance industry, like old-fashioned credit rating procedures. As a result, the small and medium-sized businesses growth and their timely access to working capital business are denied.

Bitcoins Importance

Bitcoin also called as crypto-currency is a digital currency, which was mainly created to reduce the control of the government on the transactions and to make the whole process easy without the intervention of third-parties. Transactions are noted and issued on an electronic register, called blockchain. The blockchain depends on miners to verify justification and validation of transactions before their joining to the blockchain to prevent illegitimacy. The blockchain is distributed to all the bitcoin users instead of being on a single server, and therefore is invulnerable to the hackers.

Bitcoins loan Working

Bitcoin loans work like any standard term loan where borrowed money is paid back with the interest over a defined period of time. The loan is paid in fixed installments or all at once based on the preferences of the lender. These are the only similarities that exist between them. Bitcoin is not affiliated with any central government or banking institution, so the loan will be from other bitcoin users. Bitcoin loan is provided by a peer-to-peer platform that connects investors directly with the borrowers. With the advantages of cryptocurrency, there are few drawbacks as well.

Bitcoins Drawbacks

Bitcoin is not regulated in many countries where currencies are subsidized by the government. As a result, borrowing from other countries makes it difficult to hold the lender accountable for something that goes wrong. Value of bitcoin gets fluctuated throughout the day so the borrower could end up owing several times the amount borrowed due to assorting exchange rates. Despite the issues faced by the bitcoins, its success has introduced many other alternates cryptocurrencies like Litecoin, Ripple, Mintchip. The limitations faced by the cryptocurrencies may be overcome through technological advancements in the future.