Why Small Business Owners Are Using Alternative Lending

While friendly banks are a huge asset in growing your business, some small business owners have a tough time getting traditional term loans. Poor personal or business credit, slow cash flow or a short time in business can make it difficult to qualify. Modern financial institutions are looking beyond the traditional mold to provide alternative lending solutions that are a huge help from small businesses.

  • Microloans
  • Merchant Cash Advances
  • Asset-based lending
  • Business lines of credit
  • Peer-to-peer options
  • Crowdfunding
  • Equipment leases

Why are these alternative lending options so desirable for owners? Here are a few reasons.

Startup-Friendly Financing

Alternative financing doesn’t look as much at how long you’ve been in business, but instead on how likely you are to repay the loan. If you have a great business, it shouldn’t be penalized just because you haven’t been operating for two years. If alternative lenders see you have a solid business idea, they’re often willing to invest via microloans or other methods.

Asset-based lending options such as MCAs and invoice factoring give you cash upfront in exchange for unpaid invoices or a percentage of credit card sales. Equipment leases are a great way to secure the machinery or computer systems you need to build a strong brand.

Options for Businesses With a Lower Credit Score

What can you do if your company has less-than-optimal credit? Alternative financing is a great option. In addition to looking beyond a simple credit score and gauging growth over time, lenders may offer loan types that minimize their risk. For example, in asset-based financing and equipment leasing, it’s the value of your assets that guarantees the loan, not your credit rating.

Flexible Loan Amounts

If you need a small but frequent amount of financing, term loans may not be the best option for your company. Many lenders expect term loan applications to be for significant sums of capital. Instead, look into the benefits of business lines of credit, MCAs or invoice factoring. These options let you get the capital needed for things such as inventory purchases, emergency funds, marketing needs or other expenses, without having to wait for the approval.

Faster Approval

While term loans are an excellent tool for sizable purchases such as business property or vehicles, the applications take a while to process. If you don’t have several weeks or months to wait for approval, alternative lending is a great way to obtain capital quickly. In many cases, you can get approved in approximately 24-48 hours.

If you dread the thought of getting ready for the application process for a term loan, you’re in luck. You may not have to. Looking into alternative financing instead.


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