Alternative lending is a term used to convey a wide group of financial services firms that offer loans to businesses outside of a traditional bank. Often these entities have been denied a traditional bank loan, due to banks’ frequently unattainable standards for loan approval. When a business does not have stellar credit or the collateral required to secure a loan, going to an alternative lender can be a viable option for small business loans.
What Are Some of the Benefits of Using an Alternative Lender for Small Business Loans?
One of the main perks of seeking out an alternative lender for financing is that the approval process can be very quick. Just minutes can take you from the start of the application process to getting the funding that you’re looking for. Another benefit is that the loan terms can be generous, compared to one of the subprime lenders that can end up costing bundles down the road. Even if interest rates are higher in some cases, customers have been pleased with more openness in product and pricing options, better speed, reduced search costs and better customer service.
What Can You Expect From an Application and Process?
A routine application for a loan from an alternative lender will ask you for general information in addition to your credit score (required by law for a financial institution before approving you for a loan). The online application process can take less than 30 minutes, compared to hours spent filling out and preparing a loan application for a bank. Approval can happen in hours versus weeks, and therefore users generally have the money in their accounts much quicker. In addition to your credit history, potential lenders will also consider the heath of your business. They’ll examine current cash flow and performance using a wide variety of conventional and nonconventional data sources.
The Way of the Future
Business loans from alternative lenders are rapidly growing in popularity. Companies start up everyday that are looking to be a part of this growing field. Millennials in particular seem to be drawn to loans offered in this medium, as they are used to handling things with ease through technology, and they are generally on the cutting edge of new ways of doing things. Alternative lenders have filled a population underserved by banks who want a safe bet and generally approve a small portion of the loan requests they get each year. Some banks are even making partnerships with nonbank lenders for deals such as small business loans, because they generally don’t make much money on these. If you are seeking financing for your small business, consider alternative lending as a potentially unique solution.