The lending industry of the United States has come a long way in the past two decades. With the advent of the internet and the boom of online activity in almost every sphere imaginable, small business owners have started turning to unconventional ways of acquiring capital for their businesses. Whether it is to expand operations, keep up with expenses or to refinance liabilities, business owners have taken close to $600 billion in business loans in 2017 alone. This shouldn’t come as a surprise to anyone who knows anything about running a small business. After all, injection of extra capital into the business is inevitability and small business loans are the way to acquire that extra funding.
Yet, there are still some small business owners who remain apprehensive towards the emerging methods and systems of lending in the market. The most famous of these relatively new systems of lending are alternative loans which are loans that are outside the conventional banking system, not granted by banks or the Small Business Administration (SBA) but by private lenders and companies. The doubt over the authenticity and credibility of alternative loans still lingers among business owners due to the following reasons:
- Greater degree of intangibility of process in the alternative loan sector due to online nature of lending.
- Reluctance of older generation business owners to move away from tried and tested methods.
- Inherent mistrust of loans not provided by the Federal Government or conventional large banks.
- Confusion regarding newer methods of lending due to poor awareness.
However, as many business owners as there are whohold doubts about the alternative lending methods, there are at least twice as many who have successfully acquired loans for their business that has helped them to achieve their objectives. As such, there are some good reasons to opt for alternative loans for your next small business loan.
What Alternative Loans can give you?
- Faster Financing: Alternative loans have been historically and famously faster in financing your business that conventional bank loans or SBA loans. Where the conventional bank loans take months in processing, alternative loans provide you with the precious capital in a matter of weeks, if not days. This is a huge reason why many business owners opt for taking a business loan from alternative lenders since not everyone has the time to wait around for your loan application to be processed for six months before getting the capital. Often times, loans are taken to get out of immediate and short term crises, which is why the faster financing speed of alternative loans have given them a decisive upper hand in the lending industry.
- More Offerings: Alternative loans offer a vast array of different types of loans. This is something that cannot be said for conventional loans provided by banks and SBA loans. From Merchant Cash Advances (MCA) and Revenue Based Lending (RBA) to business lines of credit and invoice financing, there are several methods of acquiring loans for your business if you use alternative loans.Merchant Cash Advance for example, allows a business to borrow money by guaranteeing a certain portion/percentage of their daily credit and debit card sales to the lender.
- Greater Client Base: The best thing about alternative loans for many business owners is their ability to provide loans to businesses that are rejected by bank and SBA loans. Examples of such businesses are those that have credit scores of less than 600, are facing trouble paying off prior debt and have spent less than the required amount of time in the industry. An example of this is how banks do not provide loans to businesses which have been operating for less than 2 years whereas alternative loans are provided to even startups that have been functioning for no more than a few months. However, it is prudent to access alternative lenders through reliable and authentic online lending platforms such as Orumfy that guarantee the credibility of the lender and prevent relatively new businesses from losing money tobogus lending programs.
- Lenient Requirements: As mentioned above, it is easier to acquire funding from alternative lenders since they set more lenient requirements to qualify for loans as compared to the federal government. A typical example of this is how banks and SBA loans require a credit score of greater than 700, whereas alternative lenders set the bare minimum limit at 640. Moreover, alternative loans set a lower revenue generation capability requirement for businesses since businesses that ask for a loan are, more often than not, unable to make huge profits. As such, it becomes favorable to opt for alternative loans.
These were just some of the reasons why you should consider opting for alternative loans for your next business loan. Not only do they compensate the business owner to a greater degree, they help you decide how to choose a small business loan as well.