There is a common misconception that banks are the only safe way to finance small businesses. With their months long and paperwork intensive application processes, coupled with high rejection rates, bank loans can appear exclusive and alluring. However, “exclusive” does not necessarily equal “better.”
Banks turn down small businesses for a number of different reasons – many of which have nothing to do with the health of the business. If your business had been declined for a loan by a bank, do not let that make you think your business is not a sound investment. Banks’ rigid criteria are designed to protect the banks’ risk and their burdensome application processes discourage resource strapped small businesses from even applying. Bigger loans for bigger businesses are more profitable; hence, these are the loans the major banks want. If your small business doesn’t fit this mold, you may feel that securing a traditional bank loan is hopeless.
Alternative small business lending is not “alternative” because it is your last resort. Alternative small business lenders have been created because so many businesses have been turned away by the banks. Since they have been founded to serve businesses that have been previously turned down for a loan, alternative lenders can solve your financing needs even more effectively than banks. Small business lending today comes in many different forms and you have numerous high quality lenders and small business financing products to choose from. Here are the 3 reasons why you should view alternative small business lending as an upgrade from a bank loan – not a downgrade
The alternative small business lending industry has outpaced the banking industry by embracing technology. They use technology to create practical payment tools for small businesses. As a result, they offer a faster, more convenient small business lending experience. Small business owners can apply for funding online and get an instant decision. They can securely access your information through a cloud database to evaluate your business creditworthiness. In less than half the time it takes for a bank, alternative small business lending providers can consider your business credit history and more. They look at your business operational data, track your cash flow, view payment history, etc. Technology allows alternative lenders to get the big picture, which opens the doors for small businesses with short credit histories, if their other records demonstrate good spending habits.
The alternative lending industry offers small business owners a plethora of ways to finance their small businesses. Loans are only one type of small business lending. There are merchant cash advances, business lines of credit, crowdfunding, angel investors, grants, venture capitalists, etc. Each of these small business lending methods satisfy a particular set of business needs. Your small business is unique. You have a better chance of getting suitable business financing from alternative lenders than banks that offer traditional loans or pricey credit card cash advances. Plus, most alternative startup lending providers have robust online experiences, making it easy for you to do research and compare your options with full transparency.
Banks must adhere to strict regulations, which gives your small business less flexibility in how you use their loans and pay for them. You can only take out a loan for a specific reason and you can only spend it to fulfill said reason. Once you receive the loan you have fixed monthly payments. In contrast, alternative lenders offer small business lending with flexible payment terms that you can use at your own will. For example, a business line of credit requires that you only incur fees on the amount you use. The funds replenish once you make payments, so that it becomes a constant source of business financing.
There is more to small business lending than exchanging money; it is about empowering small businesses. Small businesses have enormous potential to grow the economy. As a small business owner, you should demand more for your business and know the small business lending options available to you. First, let’s clear the air of misconceptions: there is more to small business lending than bank loans and alternative lending is not synonymous with bad lending. The alternative lending industry implements technology in a way that is much more effective for small businesses.
How Alternative Funding Partners Can Provide Small Business Lending Solutions
Alternative Funding Partners’ team is dedicated to providing our clients with flexible and affordable financing solutions for SMBs. We believe in exceptional service and transparency to give you confidence and peace of mind about us financing your business.