Entrepreneurs starting a new business or owners trying to keep a long-running enterprise operating will most likely need a small business loan at some point or other. Despite being called a small business, these companies require large amounts of time and money to maintain operations.
The downside to traditional lenders
While many individuals might think about heading to their local big bank to apply for a loan, these traditional lenders have quite a few downsides that should make small business owners rethink their plan. These institutions typically require potential borrowers to jump through numerous hoops before they ultimately make their decision to approve a small business loan application.
This long, time-consuming process involves combing through the applicant’s credit history, financial statements, tax returns and financial reporting. Having to submit to this rigorous exercise eats up a company’s precious resources. In today’s fast-paced business world, not only do owners and managers simply not have the time to set aside to complete these tasks, but since so many companies operate on razor-thin profit margins, taking the time out of the day that could otherwise go toward converting leads or finalizing a sale means the company is losing out on crucial revenue just to fill out the paperwork traditional lenders require for a small business loan.
To make matters even worse, going through this drawn-out process does not even guarantee an approval. According to the Joint Small Business Credit Survey Report for 2014 commissioned by the four US. Federal Reserve banks, online lenders approve 38 percent of small business loans, compared to the smaller 31 percent approval rate from large national banks. This makes access to these needed funds much more readily available for those small businesses that need it most.
What makes alternative lenders different
With an alternative lender, the small business loan application process is remarkably simple and fast, with most applications approved within 24 hours. This means there’s minimal paperwork to complete, which saves business owners time and resources.
Traditional lenders often require owners to spell out exactly what the loan will be used for, and ultimately these lenders make their final decision not only on the company’s health and ability to repay the loan, but also on the feasibility of the loan’s purpose. This means even if the small business is relatively healthy and has a plan for paying off the loan, if the big bank lender does not approve of the plans, they will reject the application. Fortunately, alternative lenders allow business owners the freedom to use the loan for any business purpose, whether it’s to upgrade office technology, rebrand the company’s image or even pay down outstanding taxes.
These differences all make it significantly easier for cash-strapped small businesses to qualify for a loan approval. Despite all the benefits, some owners might hesitate to work with an alternative lender because they erroneously believe the interest rates on the loan will be sky high. However, as Entrepreneur aptly noted, many alternative lenders offer single-digit interest rates no different than traditional lenders. Although, it should be noted that borrowers who are considered riskier might see slightly higher rates.
The incredibly high standards set by traditional lenders can be a major barrier for small businesses looking to purchase more inventory or expand into new markets. For fast, convenient, no-hassle loans, small businesses should consider an alternative lender.
With National Funding, small business loan recipients can obtain loans up $500,000 with no collateral. For those owners who pay off the loan early, there are discounts to be had. In addition, these loans can offer potential tax savings as well. The application process is simple; watch our video, and learn how to apply for a small business loan.