Lending Criteria: Traditional vs. Alternative Lenders
In a perfect world, obtaining working capital for your small business would be as simple as asking and receiving. However, it’s important to remember that lenders don’t simply hand out money to just anyone.
Lenders are taking on risk by making funds available to small business owners. Therefore, they will analyze certain criteria in an attempt to determine if a loan is too risky. At the very least, these criteria will influence the parameters of the loan – amount, term length, interest rates, etc.
By understanding what lenders are looking at, you can make yourself a more attractive borrowing candidate.
Touchstones of traditional lending
What criteria take precedence can differ from lender to lender, but there are some factors all traditional lenders will consider. These include:
- Cash flow
The higher the amount, the more risk a lender is taking on. Meanwhile, a poor credit history could indicate a borrower who may not be able to make repayments, increasing the risk further. Limited cash flow would support this viewpoint, and a lack of collateral to cover a loan default often acts as the death knell for small business owners seeking a loan.
However, the days of depending on traditional financial institutions for business loans are over. In today’s marketplace, borrowers have more options than ever thanks to alternative lenders.
Advantages of alternative borrowing
Alternative lenders like National Funding feature business models that differ from traditional banks and credit unions. This makes it possible for them to offer loans to small business owners who may otherwise not qualify.
And unlike traditional lenders, National Funding does not require borrowers to put up personal assets as collateral, since all financing is unsecured.
Along with simple, straightforward applications, variable repayment terms and the ability to obtain cash in as few as 24 hours, the benefits of business financing from an alternative lender are clear.
Tailored business solutions
Regardless of what type of lender you utilize, the most important thing is working with professionals who understand your specific needs as a small business owner.
Minimal paperwork, quick turnaround, flexible repayment options – these are all essential in the small business marketplace. You owe it to yourself and your business to borrow from a lender who recognizes and supports this.