Many business owners believe that only the big banks can fund small businesses. The banks’ paperwork-heavy application process that takes months to complete seems like the only way that you can get money for your business. But exclusive practices does not always mean better for the business owner. Banks turn down a business for a lot of reasons, some of which don’t have anything to do with the company itself.
Small Business Lending
If you got turned down for a loan by a bank, don’t allow that to have you thinking negatively about your company. The loan application process from banks protects their bottom line. Their difficult application process attempts to keep small businesses from applying for their loans in the first place. Larger businesses make more money for larger banks. Therefore, it is to these businesses that the banks want to lend money. If you don’t run a large company, then you might think that getting a loan from any source is not in the cards.
Alternative small business lending came into the picture to lend to small businesses who got turned down by traditional banks. Since these lenders got into the business to serve the small business owner, alternative lenders can often meet your needs better than the conventional banks. This type of lending comes in a lot of different formats. Just because you’re a small business owner does not mean that you don’t have access to excellent lenders. This article will show you why you should not look down upon alternative lenders when it comes time to get a business loan.
Alternative Lenders Embrace Technology
One way that alternative lending companies beat traditional banks is through using technology to get new customers. A way that these lenders embraced technology is through coming up with payment tools for their consumers. With this wave of technology comes a more intuitive experience for users.
You can just fill out an online application and can often get a decision in minutes. They can use industry-specific databases to gain access to your business information to determine whether you are a creditworthy risk. Alternative lenders can decide whether or not you’re a good risk in the fraction of the time that it takes traditional banks.
These lenders look at your business data, payment history, cash flow, and other factors. The technology that alternative lenders use allows them to loan money to businesses with short credit histories, as long as other factors tell them that they are a decent credit risk.
Alternative Lenders Offer Variety
Alternative lenders give you a wide variety of ways to fund your company. Loans only act as one way to get money for your business. Some other funding methods include some of the following:
- Angel investors
- Business lines of credit
- Merchant cash advances
- Venture capitalists
As a small business owner, you have a much better chance getting funding from alternative lenders than you do from the traditional banks. Then you have the technology of alternative lenders, which allows you to research different funding sources without leaving your home.
Alternative Lenders Offer Flexibility
Traditional banks give you a lot less leeway when it comes to how you will use their funding and how to pay them back. For example, you may only use your loan for a specific purpose. When you get the money, you will need to pay back the bank in monthly installments.
Alternative lenders give you more flexible payment terms. For example, a business line of credit may only require you to pay fees on the money that you spend. The annual percentage rate that an alternative lending company might offer you could even be competitive with the ones that traditional banks offer you. Your APR could depend upon a lot of factors, including creditworthiness.