Alternative lenders are now able to provide loan options even to startup or small business owners. While traditional financing or bank lending options may be too difficult to qualify for if you are not a giant CEO or don’t have huge financial stocks to your name, private alternative lending can give you a good offer especially with a good or excellent credit score.
Many of these alternative lenders operate online and also are able to provide different business financing solutions such as invoice financing, short-term loans, medium-term loans, and credit lines. They also come in different forms like peer-to-peer lending, microloans, merchant cash advances, or online lending. Even some homeowners are turning to alternatives to mortgages.
They are fast and efficient in approval of loans and also have very minimal requirements. While it may be tempting to dive into the alternative path, you must understand how the alternative lending landscape works as well as the pros and cons of getting loan from this route.
Here is an interesting talk we found about the future of alternative lending for small business:
Why Loan From Alternative Lenders?
Business empires do not grow overnight. It takes years of hard work, persistence, and lots of hits and misses to hit the success button. For many small businesses or solo entrepreneurs, it can be really hard to get financing especially if you are still learning to spread your wings in the industry.
Well, alternative lending isn’t just for budding entrepreneurs or small businesses as more medium- and large-scale enterprises are now looking at alternative lenders as a source of quick additional funding for business expansions. Here are the reasons why:
Faster approval time
Why wait in line for weeks or months with banks or traditional lenders when you can get your money in days or a matter of hours.
Higher approval rating
With banks or traditional lenders, the approval rate is relatively low or at only 13% to 20% which attract borrowers to shift the alternative way which offer a higher approval rate of as much as 61% to 64%.
Less paperwork
For most alternative lending agencies or companies, applications and approval are very fast as it is done mostly online. It provides individual borrowers and businesses flexibility as there are very few requirements and no or less paperwork. Processing is a breeze.
When Do You Consider Alternative Lenders?
Most businesses with a bad credit reputation may be denied by traditional lenders or banks. There are times too that the loan amount may be too small that the bank would not consider it for underwriting. Sometimes, the market trends may not favor your industry at a certain point. As such, this also decreases your chances of bank loan approval.
This is precisely the reason why many businesses – big or small – are contemplating on trying out alternative lending. These non-traditional or alternative loans offer diverse financing solutions that can match any business or individual loan needs. So if you have a bad credit standing or you might want quick and hassle-free processing with fast approval and release of funds, then consider alternative lenders.
What To Look For In Alternative Lenders?
There are different kinds of alternative lenders to choose from. Many businesses are looking for working capital to pump up their business. Most businesses and even individuals are now looking for alternative loan solutions that offer bigger perks. It really depends on the purpose of the loan, source of income, and loan amount to decide what kind of alternative lender you would go for.
When shopping for an alternative lender, always check on the payment terms and the interest rates or penalties. Always check the terms and conditions. Look for an alternative lender that matches your loan requirement and needs. Always go for flexibility and those with quick processing and low and fixed interest rates
Alternative Lending Options
Payday Loans
For salaried employees or those with regular work, you can take advantage of payday loans that offer check cashing loans when you are short of cash and still waiting for payday. They guarantee fast approval and speedy disbursement of funds but have high interest rates.
Microloans
If you are starting a small business or currently own one then a microloan can help you by extending working capital to build and grow your business from scratch. You can borrow small amounts of cash and pay in monthly installments. It’s very easy to apply for microloans and also have a high approval rate. The interest rates are flexible and reasonable. In addition, their loan officers also provide assistance in other areas of your business such as marketing.
Peer-to-Peer Lending
This type of lending platform seamlessly connects business owners or people in need of financing to investors. The loans are also open for bidding to investors. This is open for those who have a good credit score as most investors would base their decisions on the borrower’s credit report. Unlike traditional lending or financing, there are no prepayment penalties charged and there are also fixed monthly payments. Borrowers with good or excellent credit scores would enjoy low interest rates or as low as 5%. On the other hand, people with bad credit may also borrow but they would have higher interest rates or as much as 35%.
Online loans
This comes in two types – Merchant Cash Advances and Cash Flow Loans. They could get the loan payment from your sales or future profit until full loan is paid off. It’s very simple and easy to apply for online loans. First, because the processing happens online and approval gets done in hours or a matter of days. You don’t need to go directly to the physical office or bank to apply, just go online and apply in minutes. Disbursal or release of fund is quick but the interest rates are relatively higher than traditional loans.
Final Thoughts on Alternative Lenders
The new kid on the block of financing solutions is making waves and shaking the system as it is. Financing your business is now made quick and easy. Specifically, with these alternative lending options that is also made available even for those with average income, small business owners, and even for borrowers who have a negative or bad credit score. Borrowing from alternative lenders may help you get the boost you need for you business expansion. Alternatively, they can fund a unique business idea, get funds for regular daily expenses, and can also help you rebuild your credit reputation. Know and understand what works for you, the benefits and advantages, and get that business rolling today.
