Small businesses often have a hard time finding financing from a bank. This may be because their credit is poor, they have not been in business very long or they only want to borrow a small amount. Any of these factors can cause a bank to reject a small business for a loan. However, there are other sources of financing than banks, and these are collectively called “alternative financing.” The following are some of the advantages of alternative financing.
1. Ability To Borrow Small Amounts
A bank will usually not lend amounts less than $200,000 to businesses. If you need a loan for a smaller amount, you will need to look for non-bank financing. One type of financing that is ideal for this purpose is a small business line of credit. With a line of credit, you don’t have to borrow all the money upfront. You just get approved for a certain amount and then borrow as much as you need when you need it, similar to how you use a credit card. An alternative lender can set up a line of credit for you.
2. Easier To Qualify
Alternative lenders do not have to follow the same rules that banks do. So, they will be able to offer loans that are easier to qualify for. Alternative lenders will look at different factors than the banks do. You will not have to have perfect credit as long as you can show that you will be able to pay the loan back.
3. Quick Approval
Getting financing at a bank can take a long time. The application process is detailed, and it takes the bank a long time to make a decision. However, alternate lenders usually have a more streamlined process for applying for a loan. They can often give you an answer within a week. An online lender may even approve a loan on the same day that you apply.
4. Lower Interest Rates
There are a lot of alternative lenders around, some of them online. Because of this, there is a lot of competition between lenders, and this results in lower interest rates. Alternative lenders are also more used to working with small businesses, so they know how to assess the risk involved and will give lower rates to their best prospects.
If you need to borrow money for your small business, the above advantages indicate that you will be better off looking for alternative financing for your needs. They can often get your funding more quickly and easily than a bank could.