Alternative financing comes from lenders other than traditional banks. Today’s traditional banking giants often don’t consider it worth their while (or worth the risk) to lend to smaller businesses. Because they have been turning away, alternative lending has grown and developed. These alternative lenders or non-banks may accept applications online and make lending decisions quicker. Business owners who could benefit from alternative lending include those who:
Need a fast approval decision
Institutions offering alternative financing often rely upon high-tech algorithm based underwriting. That typically means that they won’t concentrate solely on your business credit score. The algorithms typically aggregate many variables, such as bank transactions your business has made, online sales, and even comments made about your business on social media. They use this information to determine the level of risk, their approval decision, loan amount, repayment terms and the interest rate you will be offered.
Want to avoid paperwork
The all-online application process makes applying for a small business loan simple and typically paperless. You may need to upload certain documents.
Prefer flexible, favorable terms
More competition means you don’t have to accept generic big-bank loans. Be sure to add up all the costs of your funding, including interest rates and fees.
Alternative Financing Pitfalls: What to Watch Out For
When you’re in the market for a non-standard business loan, pay close attention to rates and terms. Don’t take the advertised APR at face value. Loan parameters are changing. For instance, there are longer and shorter terms available today than ever before. Shorter-term loans, in particular, can be expensive or have burdensome, sometimes confusing terms. If you turn to alternative funding from angel investors, rather than financial institutions, be wary of giving away some overall and day-to-day control of your business.
Learn more about your alternative financing options. Contact Skybridge Capital Group today.