The lure of “Fast Money” and “Quick Cash” for your business is hard to ignore; thousands of ads and offers bombard small businesses every day via: direct mail, calls, emails, pop-ups and radio. Advertisements from alternative lenders provide an enticing promise and give hope to the many Small Business Owners that can’t access financing from traditional banking institutions. These are business owners in need of the working capital and equipment funding necessary to maintain and/or grow their business, and this funding is an appealing offer when it seems there is nowhere else to turn.
Unfortunately, one very important question often goes unasked by Small Business Owners that I speak with:
“Why are there so many companies telling me I can get quick cash for my business when the traditional banks are saying no?”
The 3 points below explain why this question SO important to understand for any business owner making a financial decision.
1) There is money to be made by selling loans to Small Business Owners:
Alternative loans, like cash advances and application-only equipment financing, can be expensive. The relatively high cost of these loans is a reflection of two factors:
o The risk the lenders take on when offering such loans
o The commissions many direct lenders pay to the rapidly-growing broker community that sell these loans
2) The length of time between the loan offer and the transfer of funds to the borrower is extremely fast.
Unlike a conventional bank loan, working capital loans, cash advances, and some equipment financing loans close more quickly, sometimes in less than 3 business days. Because these type of loans close quickly, the companies and brokers selling the loans get paid their commissions quickly as well. Small business owners should ask themselves whether the broker is thinking more about their own commission from a deal rather than what is in the best interest of your business in the long run. In sum, beware of high pressure sales tactics!
3) All traditional banks, for the most part, underwrite loans in a similar manner.
It’s great if you fit in their credit “box”, but that box is extremely limiting and ends up excluding the vast majority of businesses, especially start-ups. On the other side of the fence are alternative lenders. Each one may evaluate your business in different ways, and they are more flexible and creative in the ways they can get you the money you need to grow.
To sum up the above points into a simple sentence, if a broker can Make a good commission selling alternative loans, Get paid quickly on the loans they sell , And have a number of alternative lending options to sell you, then it is not surprising that the number of businesses and brokers offering “Quick Cash” is exploding today.
The next critical question for Small Business Owners seeking business financing is “Who can I trust?”
