What Is Alternative Lending?

At some point in the lifecycle of your business, you may find yourself in need of financing. While traditional lending institutions like banks and credit unions may be the go-to option for most, they are not always the best choice. Enter alternative lenders. Alternative lending has been around for a while, but it has become increasingly popular in recent years, providing small business owners with a flexible, convenient, and accessible financing option.

In this article, we will delve into the world of alternative lending, explain what it is, how it works, and why it might be a better choice for your small business financing needs.

What is Alternative Lending?
Alternative lending refers to any type of financing that falls outside the traditional lending process. It includes a wide range of financial products, such as merchant cash advances, invoice financing, equipment financing, peer-to-peer lending, and crowdfunding. Alternative lenders operate differently from banks, credit unions, and other traditional lenders. They use different criteria to evaluate loan applications, making it easier for small business owners to secure funding.

How Does Alternative Lending Work?
Alternative lenders provide financing to small business owners using a variety of methods. One popular method is merchant cash advances. This type of financing allows businesses to receive cash upfront, which is then repaid through a percentage of future credit card sales. Another option is invoice financing, where businesses sell their unpaid invoices to a lender in exchange for a percentage of the total amount. Equipment financing, on the other hand, allows businesses to purchase equipment through a loan, which is secured by the equipment itself.

Alternative lenders usually have more relaxed requirements than traditional lenders. They look at other factors aside from credit scores and collateral, such as business revenue, cash flow, and payment history. This makes alternative lending a more accessible and convenient option for small business owners who may not have a strong credit history or valuable assets to secure a loan.

The Advantages of Alternative Lending
There are several advantages to using alternative lending as a financing option for your small business. Here are some of them:

Fast and Convenient
Alternative lenders offer a faster and more convenient loan application process than traditional lenders. You can usually apply online, and the approval process is quick, with funding available in a matter of days. This means you can get the money you need to grow your business without the long waiting times and paperwork associated with traditional lending.

Flexible and Accessible
Alternative lending offers more flexibility and accessibility than traditional lending. Alternative lenders cater to businesses of all sizes and types, including those with poor credit scores or little collateral. They also offer a wider range of financing options, making it easier for small business owners to find the right fit for their needs.

Customizable Terms
Alternative lenders offer customizable loan terms to suit the needs of individual businesses. You can choose the repayment period, interest rates, and other terms that work for your business. This means you can find a loan that fits your cash flow and budget, without having to conform to the rigid terms of traditional lenders.

High Approval Rates
Alternative lenders have higher approval rates than traditional lenders. This is because they use different criteria to evaluate loan applications, such as revenue and cash flow, which are more relevant to the financial health of a small business. This makes alternative lending a better choice for small business owners who may not qualify for traditional lending due to their credit score or collateral.

Conclusion
Alternative lending offers a convenient, flexible, and accessible financing option for small business owners. With faster approval times, customizable loan terms, and higher approval rates, alternative lending can help your business grow without the hassle and restrictions of traditional lending. If you’re in need of financing for your small business, consider alternative lending as a better choice.