Small business owners in nearly every industry often face a similar financial challenge – they have trouble finding access to working capital. Credit concerns and a lack of collateral often keep applicants from qualifying for traditional lending options, while banks and credit unions seem perfectly willing to lend to those who don’t really need the cash. The entire process of seeking a business loan or applying for small business financing can be a daunting and frustrating experience for any business owner, let alone those who don’t have perfect credit. To address this gap in the small business lending market, a new breed of lending has emerged to assist a greater share of business owners – alternative lending.
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What is an alternative lender?
An alternative lender is one who provides loans, lines of credit, or cash advances to small businesses, outside of the general construct of a bank, credit union, or the SBA. Are these lenders a fad? Or, are they a revolutionary new player in the small business lending space? According to Karen Mills, former SBA Administrator, “Alternative players have the potential to fundamentally change the way in which small businesses access capital.” While banks and credit unions will likely continue to serve a specific segment of the market, alternative lenders have the ability to construct more flexible lending options for a wider range of clients. The following are several key benefits to using alternative sources of small business capital:
Bad credit, OK!
When you apply for a small business loan through a traditional lender, like a bank or credit union, the first thing that is checked is the owner’s personal credit score and the business’ credit profile. Most banks and credit unions require strong FICO scores, limited debt utilization, no late payments, and no public record filings. The business and the owner need to look pretty flawless on paper – yet this is rarely the case among the majority of small business owners. Many alternative lenders don’t necessarily care about the FICO score component. These lenders are generally much more concerned with the overall revenue stream of the business and the company’s ability to repay the debt. If you have poor or bad credit, an alternative lender will give you a much better chance at obtaining a loan approval.
The process is quick
When you take the time to apply with a traditional lender you absolutely must realize that the process of obtaining this type of financing can take weeks or months. When time is of the essence, traditional lenders often fall victim to their own arduous underwriting policies and archaic processes that can extend the application to funding timeframe dramatically. Alternative lenders, like National Funding, generally provide an online application that can be completed in a matter of minutes. Plus, you’ll generally receive a same-day lending decision so you won’t have to wait for weeks to hear “yes” or “no.” Funding is typically accomplished within a week, enabling the business owner to manage immediate expense concerns quickly.
Alternative lenders tend to offer a wider variety of loans, lines of credit, and cash advance products than any bank or credit union. Merchant cash advances are one option that many alternative sources provide, and reputable lenders like National Funding also offer solutions such as equipment financing plans, unsecured business loans with no collateral, and additional services like merchant processing. Traditional lenders are often quite limited when it comes to product assortment, and this inflexibility might prevent the borrower from finding the appropriate financial tool for their business.
If you are looking for a way to help your small business grow, but you are also contending with limited or no collateral, a poor credit situation, or minimal profitability, you will want to consider alternative lending. While many small business owners think that traditional sources of business capital (like banks or credit unions) are the answer, alternative lenders are often able to provide much quicker access to cash, more flexible lending programs, and a much easier application process than these institutional lenders. Finding the right alternative source for capital is the first step in the process, so contact the experts at National Funding today to investigate your options. You might be surprised at what you’ll find when you work with a leader in the alternative lending field.