Queue 2017. More than ever, this is the era where digital solutions exist for nearly every problem. From social networking and seamless video chat for communication all the way to hyper-realistic, immersive virtual reality gaming systems and everything in between, it’s absolutely undeniable that technology is a standard integration in modern society. In fact, most of us simply couldn’t function the way we do now without technology. Or at least, the way that we’re used to functioning.

As a result of our modern tech landscape, digital currencies like bitcoin have come to rise in the past several years. While bitcoin isn’t necessarily a new way to acquire goods and services in today’s free market economy, it does represent interesting and newer solutions to small business lending that differ from conventional loan methods. We’ve found bitcoin and other like currencies to be interesting, and that’s why today’s blog post is going to take a look at everything bitcoin-related and how it connects to prospective small business loans and a business line of credit.

CFG Is Your Key To Business Funding

While The Commercial Finance Group is quick to adapt to such digital trends, our comprehensive lending solutions have served as the “bridge to bankability” for countless small businesses and other companies that are seeking additional working capital for their enterprise. We’re proud to have established a rich heritage of helping companies reach their true potential, and through currencies like bitcoin or not, you count on The Commercial Finance Group to help you when you need it most. Visit this page to learn more about our signature approach to lending. Let’s take an in-depth look at the inner-workings of Bitcoin and digital currency.

First: What Is Bitcoin, Exactly?

Invented around 2009, bitcoin is considered a cryptocurrency, or an entirely digital form of money. Bitcoin and other like-cryptocurrencies are significant because they’re person-to-person, or “p2p”, meaning that there are virtually no banks, governing bodies or other financial institutions involved in the process. By using a technology system called blockchain, bitcoin keeps your “wallet” safe, encrypted, and secure from fraud.

The digital format of currencies like bitcoin makes for faster, cheaper and more convenient exchanges of cash – all things that a small business could possibly benefit from. All things considered, bitcoin’s numerous advantages stem from its inherent decentralization or autonomy from other parties. For example, blockchain, the technology that bitcoin and other cryptocurrencies are based on, makes it so that you don’t have to rely on a traditional banking institution to facilitate your financial transactions.

Potential Advantages

  • Bitcoin is relatively inexpensive: For one, bitcoin transactions are fairly cheap for what they’re worth. A traditional lender might charge 2 or 3 percent for a merchant transaction fee, while bitcoin transactions usually cost between zero and one percent. So, you can send (and receive) bitcoin or similar cryptocurrencies with little to no fees. Plus, since there’s no bank required in the process to verify a bitcoin transaction, that means you won’t have to sacrifice the revenue of your own small business to the certain financial institutions that own your business loans, small business lines of credit, and so forth. If you so choose, you can usually pay a small but optional transaction fee that speeds up the processing of your transaction. And getting those funds as quickly as possible is a pretty valued aspect of successfully running a small business, right?
  • Bitcoin Is Fast: Even if you want your funds to be processed quickly regardless of which end of the financial transaction your business is on, you might not even need to pay that small, optional fee to speed things up. Due to the fact that there’s no centralized financial institution that checks and verifies every bitcoin or cryptocurrency transaction, things are done automatically and lightning-fast through the underlying blockchain platform. Compared to the speed of credit card processing, decentralized currency transactions are facilitated extremely quickly.
  • Bitcoin Is International And Foreign-Friendly: Do you export your goods, materials or purchase supplies from across the pond? No worries. Online currencies have shown considerable promise when dealing with foreign transaction fees, exchange rates, or other currencies. Bitcoin’s ability to “go beyond borders” is due to the fact that it’s a global currency, meaning that it is not tied to a single government, company, or entity. So as long as your suppliers and customers accept bitcoin, your small business should be good to go.
  • Mitigated Payment Disputes: With conventional currency and dollars, disputes about vendor, supplier or customer payments can be frustrating to navigate as a business owner. But if you’re having trouble accepting customers’ credit card payments, for example, accepting bitcoin could help. Even though bitcoin is a digital and non-tangible currency, it works very similarly to physical cash as opposed to credit. When bitcoin is transacted, it is automatically considered final and cannot be contested by a customer on the basis that he or she wasn’t satisfied with the product or service in question.
  • Investment Potential: Bitcoin seems to be an interesting and often-intriguing investment for many. While its value is rather volatile and fluctuates quite frequently, bitcoin still serves as a good investment opportunity for many people. Keep in mind, however, that bitcoin and other cryptocurrencies are generally considered less stable than payments in actual cash or other valuable commodities like gold or silver. After all, the market has had extensively more experience with dealing with such commodities.

Some Issues With Bitcoin

We’re sure that these advantages to bitcoin sound almost too good to be true, and to an extent, that seems to be the case. Bitcoin and similar cryptocurrencies are not without their faults, as we’ll explain in detail below.

  • Bitcoin Is Unregulated: That’s right – one of the main potential advantages of bitcoin is also one of its potential weaknesses. Although decentralization is a huge plus for online currency, bitcoin’s innate lack of government support may scare off certain individuals or companies from wanting to deal with it. While the United States government and other governing bodies around the world recognize bitcoin as a valid and legitimate form of currency (and even as a positive influence on financial regulation), some countries around the world have actually banned or restricted the use of bitcoin. So, use online currency with appropriate caution.
  • It’s Unstable: Bitcoin is largely considered unstable (and for valid reasons), though it has shown promise in being increasingly stable over time – even beating out gold in certain cases. Bitcoin is still a currency that, on a fundamental level, isn’t being overseen or regulated by a single financial institution or governing body. So if things like the economy need it, the Federal Reserve can raise or lower interest rates, while no such option exists for bitcoin or other cryptocurrencies. So be it.
  • Planning Can Be Difficult: Bitcoin’s volatile nature doesn’t make things easy. With a decentralized and purely digital currency, it can be somewhat difficult to do things like plan financial statements, figure out your taxes, and determine the prices of your goods and services. Though doable, it’s pretty challenging to make projections that account for large fluctuations in value or changing government regulations. Before integrating bitcoin into your small business or company, you’d obviously want to consult your bookkeeper and accountant.

Bitcoin and eCommerce

eCommerce has been a rapidly growing way to sell items and goods online, and we’ve seen online shopping on the rise for many years. However, it was only a few years ago that popular eCommerce website platform Shopify started to accept bitcoin as a legitimate and verified way to pay. We see that many people choose to sell their products online, and Shopify accepting bitcoin could lead to a profitability increase for merchants who use it. This could also lead to an increase in value for bitcoin as a whole, something to consider if you’ve invested in it.

Bitcoin And Growing Your Small Business

Bitcoin could also help your small business grow by exposing you to an entirely new marketplace – especially online. If you choose to use Bitcoin, it can instantly make your small business an international seller, tapping into markets that you could not access previously. That being said, expanding your operations into new markets also presents many risks associated with technological money exchange, like laundering. Because bitcoin cannot be returned or re-issued once it has been sent by one party and received by the other, bitcoin lacks consumer protection. This lack of consumer protection could deter many customers away from merchants that primarily use bitcoin, so there’s yet another thing to consider for your growing business.

Take What You Will With Bitcoin

All things considered, there are a lot of benefits and advantages for your small business to gain from using bitcoin and other digital currency systems. However, there are also many cautions and risks that you’ll want to keep in mind before you jump into things. So, if you’re really considering integrating bitcoin into your growing small business, take a moment to sit down and assess how it can actually help your particular small business situation and how to navigate the potential challenges. For general loans for small business, get in touch with the experts at The Commercial Finance Group today.