Aug, 2020

What Happens to Your Business When the Bank Is NOT An Option?

Marcus Wells

Funding Consultant / Sr. Broker

For decades banks have been the only institute that could provide sufficient loans not only for a startup but also for businesses that have been running for a while. The most significant disadvantage was that if a bank refused to give a loan, there wasn't a second option to acquire the finances to help them run the business. However, the good news for business owners is thanks to the alternative lending industry banks are not the only lenders.

 

Alternative lending is a term that encompasses the new small business lending options available outside of traditional bank lending. Traditional bank lending is notoriously hard for small businesses to qualify. By turning to alternative lending, small business owners are more likely to qualify for funding.

Simply put…​

Alternative lending is lending that takes place outside of a banking institution.

 

Banks are called" traditional" financing institutions. When you read about traditional lending, you're reading about banks—usually big banks—that make large loans, distribute credit cards, give you checking and savings accounts, hand out mortgages, etc.

 

Banks want to "play it safe." This is the reason why they would not take your promise to pay them back as soon as you receive your payment as a valid promise. They may require actual tangible assets like the inventory of your company, land, or even your house as collateral.

 

The alternative lender, on the other hand, asks for no such thing. Alternative lendings put their trust in the business owner, who believes that they can get their account receivables turned into a payment quickly.
 

What Are Some Drawbacks of Alternative Lending?

Although banks have strict guidelines, slower processing, and fewer approvals, they do provide lower interest rates for the borrower. However, this is not the case with alternative lenders, who have been known to charge higher interest rates for their customers.

 

Also, the payback periods are often shorter with alternative lenders.  Alternative lenders may require daily or weekly payments instead of monthly payments. 

Conclusion

Alternative lending exists because so many small businesses have been turned away by traditional lenders. Alternative lenders have been much quicker than banks to embrace technology; this has enabled them to provide small businesses with a quick and convenient lending process. In a fraction of the time the traditional loan application process takes, alternative lenders can evaluate your business creditworthiness,  confirm cash flow, and view payment history.

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Marcus Wells

Funding Consultant / Sr. Broker

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ABOUT US

It has always been our top priority to help our clients grow and expand their businesses. Our co-founder Marcus Wells comes from the mortgage banking industry where is helped clients successfully fund hundreds of loans over the years.  
 
After consulting with many entrepreneurs, business owners, and investors, we started to recognize that the lack of capital was preventing many from growing their businesses. We are excited to have a solution to assist small business owners and investors who need capital to grow & expand. 

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