Advantages of Alternative Lending
The research firm says the growth can largely be attributed to small business customers. They need cash now, but don’t qualify for a traditional loan for one reason or another. But fast cash isn’t the only reason to seek out an alternative lender. Other benefits exist, and they’re shared here so that you can decide if alternative/private lending is right for you.
1. Fast Cash
When you need money for your small business or organization, you might automatically leap to traditional loans and grants. It’s not unexpected. The two small business funding options are basically hardwired into the small business owner DNA. They can fill needs that alternative lenders might not.
However, standard applications for a loan or grant often require pounds of paperwork and patience. Waiting can be for weeks and even months before hearing anything.
The walk-in freezer broke, or you need to hire a new chef to meet increased customer demand. These challenges can’t wait. They need to be resolved, now. And that’s where alternative lending comes in. Many alternative lenders will approve your application within hours. The money often goes direct to your account too. With that money in the account, you can keep the ice cream cakes from melting and prevent the perfect chef from walking out the door.
2. Fewer Requirements
Standard bank loans feature rigorous requirements. These can range from your time in business to the presence of collateral. Banks may pay inordinate attention to your credit rating and financial well being, too.
Small business alternative lenders will pay attention to some of those elements. However, they may not require all of them. Some providers, such as those working in the merchant cash advance space, might not require anything more than records documenting business health and ability to repay.
3. Multipurpose Use
If you’ve taken out a small business loan or received a grant in the past, you know that they sometimes come with stipulations. The provider says, “We’ll give you this money as long as you use it per the agreement.” If you do, great. If you don’t, trouble could come your way.
As a result, the small business lender can reverse the loan agreement. It might even add a fine or penalty. You can be put on a black list, making it harder to seek loans or grants in the future.
Private small business lenders could employ those same regulations, but they rarely do. They tend to offer more flexible financing with fewer guidelines and oversight.
4. Personalized Funding
5. Flexible Terms
Reviewed on 18 February 2020