The Advantages of Alternative Lending
Many small business owners had to find ways to keep their doors open during the Great Recession, and many others are still struggling even though the economy has rebounded. The Great Recession taught the masses that big banks cannot be trusted, and even if they could be, most businesses have suffered losses that have negatively affected their bottom line. Even if they did trust a large financial institution, they wouldn’t be approved for a loan. This is why alternative lending is a viable solution that small businesses can use to their advantage.
More Lending Flexibility
Credit is an issue for most struggling and start-up business. Major banks are not going to put their big hands into a small pie, particularly since all they look at to finance a loan is a business’ assets. Alternative lending tends to be more flexible, with smaller loaners willing to look at an entire business’ picture and not just its profit and loss sheet.
More Spending Flexibility
In most cases, a traditional funder is going to want to know exactly how the money is being spent. Lenders that offer alternative funding are not concerned with the money-spending plan. Their goal is to finance the business quickly. In fact, this type of funding is oftentimes issued instantly to cover a business’ financial gaps, such as the need to meet payroll or replace damaged equipment. These costs must be met immediately to stay afloat, and alternative lenders understand that.
Big banks are stringent on repaying their loans, and they’ll go after everything a business has if the payments aren’t made on time. Alternative lending gives a business more flexibility in paying back the loan. One of the greatest benefits of this flexibility is being afforded the opportunity to repay the money on a variable payment schedule, which means as sales increase, payments increase, and as sales decrease, payments decrease.
Short-term payment schedules are another advantage to these types of loans. A small business does not want to be saddled with debt and its related interest for an extended period of time. With alternative funding, the payback schedules are designed to pay the loan as quickly as possible without taxing the business-owner further financially.
Alternative lending is becoming one of the more popular ways to fund a business—even with the big guns. With these types of loans, flexibility works in the business, not the lender’s favor, and a wider variety of loan and payments options fit within any entrepreneur’s lending needs.