Whether you’ve run into a cash flow problem, an emergency expense, or are looking to expand, there is a strong likelihood that you may need a loan for your business. When looking at your options for funding, there are two main camps to consider: traditional lending and alternative lending. Traditional lending are your banks and credit unions in the area. Then there is alternative lending – these can be online based banks or any type of non-traditional lender. Both types of lending have their own advantages. Read on to compare the features and why many business owners are utilizing alternative lenders for creative solutions to their business needs.
Seeking out a loan with traditional lenders is still a common and popular option. Because banks make their money from other means than just making loans (such as account fees, debit cards, overdraft fees, etc.), they typically are able to offer lower interest rates than alternative lenders. This feature alone makes them an attractive option to many business owners. However, traditional lenders’ requirements can be much more stringent and more difficult to meet than an alternative lenders.
Many traditional lenders will require much more than a simple application and submission of financials. A formal business plan is also usually needed, something that will take additional time for a business to construct together. Traditional lenders may also require that your business have collateral such as equipment, supplies, or inventory. Other requirements that can be difficult to meet is your time in business Many banks will not lend to businesses that have not been operating for less than two years. This takes many business loan applicants out of the running before they’ve even had a chance to apply.
Additional hurdles to consider are a few that can’t necessarily be changed quickly. Good personal credit can be a requirement that some applicants just can’t meet. Applicants can also be denied due to a personal bankruptcy in their credit history. Unfortunately, traditional lenders’ flexibility on these issues just isn’t there. This can leave many small business owners who have put their own funds and credit on the line to keep their businesses afloat in jeopardy.
When business owners are unable to meet the rigorous requirements of their local bank for a business loan, many begin looking into alternative lending. Because alternative lenders must rely on investors or even their own funds, the interest rate charged can be higher. However, there are many attractive features that alternative lenders can offer that make this a better and smarter solution for business owners.
LARGER CREDIT BOX & RESOURCES
Alternative lending offers a larger credit box and creative financing options to find solutions in order to serve customers that traditional lenders just can’t. While alternative lenders still have their own requirements, such as a minimum credit score, it is likely to be lower, thereby making it easier to qualify than with a traditional lender. Alternative lenders are willing to work with young, up-and-coming businesses, and will take the time to learn about a business and its owners before making a decision on loan approval.
STREAMLINE APPLICATION AND APPROVAL PROCESS
Applicants can also expect a faster and much more streamlined application and approval process when working with an alternative lender. With more and more alternative lenders available online, it is fast and easy to apply right from your computer. Many allow businesses to connect their accounting software directly to submit financial information, making the application process lightning fast.
Applicants can also expect decisioning to be much faster as well. This is welcome news to businesses who are in a crunch and need funding fast. Rather than waiting up to four weeks or even longer with a traditional lender, applicants can expect to receive approval within days, and can even receive funding the same day as approval!
CREATIVE FUNDING SOLUTIONS
Alternative lenders work with business owners to find creative solutions to get funding. As stated earlier, alternative lenders work with their investors and their own funding, and can even partner with traditional lenders to obtain funding for their customers. This allows business owners to build credit for future financing needs, and can even aid in receiving traditional funding in the future! Alternative lenders are creative lenders; if there is a way to get a business the funding it needs, they will find it. Even if that means the business will go on to utilize a traditional lender in the future. It’s all about finding the financing that is going to get your business to the next step in its growth.
There is no one size fits all answer to the lending source that is best for all business owners. Every business is different. Its needs are different. Its hurdles are different. The key is to find a lender who is able to work with you to find a solution that will not only help you with your current needs, but also help your business grow and flourish. At LendSpark, we take the time to see more than just the numbers. We see your business. We see you. We will be more than a lender; we are a partner in helping your business reach that next level of success.
Learn what you can qualify for by applying here.