3 Reasons You Should Consider Using an Alternative Lender for a Small Business Loan
Big banks have notoriously tough requirements when it comes to issuing loans. Not only are they risk-averse, but they also tend to favor businesses that have a proven history of generating income. This is usually not the case with most small businesses. They are often struggling at first and didn’t have the time to build a solid credit history. But there could be a solution for businesses like these, and that’s alternative lenders. Let’s take a look at a few reasons why you should consider going for an alternative lender for your small business loan.
One of the things that separate most alternative lenders is their approval processes. Traditional banks will put a lot of importance on your business’s credit history before they award you a loan. The only difference is if you have an extensive history of working with them.
With alternative lenders, they might look at your business more holistically. They might look at your assets, the state of your books, or how much you are owed by debtors. Alternative business financing options allow you to borrow based on your business’s health more than anything, and it’s often not reflected in your credit score. So, if you don’t think you have the credit history, but your business has generated a lot of income and has been well managed, these can be a very viable option.
All major banks will have internal policies dictating the type of people they give loans to. Depending on your business, the lender might deem the loan too risky and refuse it.
You might be surprised at what some of these businesses are as well. Some banks may refuse to fund restaurants or beauty salons, for instance, even if you know you have a proven business model and there’s the demand where you are.
The reason alternative lenders would be a good choice there is that many purposedly target these businesses since they know there’s a hole to fill. These lenders will often have much more inside knowledge of an industry and have a real idea of whether your particular business is risky or not. Going for a lender that is known for catering to your niche will greatly increase your chances of getting accepted. It will also ensure that the process goes much more smoothly.
Speaking of process, one of the things that stand out the most about alternative loans is how easy they are to apply for. You don’t have to get grilled by a sometimes very hostile and condescending loan officer for hours. You also won’t have to wait weeks to get rejected as often happens with banks. Alternative lenders will usually allow you to do everything online with nothing but a few documents. They also tend to extend the money much faster.
These are all reasons an alternative lender might be the best option for your small business. They are more likely to want to work with you and usually have gentler requirements, so go ahead and speak with one today.