Private lenders and brokers compete with traditional retail banks to provide Alternative Business Loans to companies of all sizes. The competition creates a healthy balance between funding providers and simultaneously benefits customers by giving them plenty of options to work with. By the way, giving customers options is what we do best.
Unlike retail banks, we connect our clients with alternative business loans from a variety of sources. Alternative lending has a lot to offer in terms of flexibility, rates and terms, approval criteria, application processes and more. If you're in the market for alternative financing, we hope you'll consider the five things discussed in this post.
1. Stellar Credit Is Not Required
Good credit is never a bad thing when you're trying to borrow money. A borrower with good credit and a solid repayment history is eligible for the best loan products with the most favorable rates and terms. But know that stellar credit is not required to obtain alternative business funding.
The extensive list of funding sources we work with is what makes borrowing with poor credit possible. It is entirely possible to get business loans even if a borrower's credit is not the greatest. Business owners don't necessarily need collateral or multiple years of business experience either.
2. Rates and Terms Do Matter
Alternative Business Loans are like any other form of credit in that rates and terms apply. Moreover, rates and terms actually matter in relation to how much a borrower ultimately pays for the privilege of doing so. That's why it's so important to look beyond interest rates alone. Bowers really need to understand all the details of rates and terms.
There are two kinds of rates to think about. First is interest rate. This is the amount of extra money paid for the privilege of borrowing, based on a percentage of the amount borrowed. Next up is annual percentage rate (APR). This is a representation of the total amount paid on top of principle, measured annually. It includes both interest and any additional fees and charges associated with the loan.
Loan terms dictate how long a borrower will pay on the loan. For example, a three-year loan would require 36 monthly payments. Why is this important? Because loans with longer terms end up costing more in interest payments. Borrowers ultimately pay less interest by keeping terms as short as possible.
3. Affordability Is a Factor
It behooves borrowers to remember that affordability is a factor in business financing. Just as a mortgage lender expects home buyers to be able to afford the loans they are seeking, business lenders expect borrowers have the means to repay what they borrow.
Lenders are required to make every effort to determine affordability before approving a loan. This sometimes dictates that borrowers furnish documentation to prove financial health. At any rate, it doesn't make sense to apply for business funding that stretches the budget to its maximum.
4. There Is More Than One Kind of Alternative Business Loan
It is not uncommon for us to work with new clients who come into business funding not realizing all of the many options available to them. In short, there is more than one kind of business loan. Through our partners, we are able to offer a full range of products including SBA loans, business lines of credit, unsecured loans, and even merchant cash advances.
The key is figuring out what form of funding is best for a given need. That's where expert advice comes into play. Sitting down with an experienced consultant is the best way to figure out how to fund specific business needs.
5. Borrowing Is Normal for Business Owners
The last thing to consider about business funding to have an Alternative Business Loan is the fact that borrowing is normal. Business owners look to lenders to help them meet both short and long-term cash needs. Thus, there is no shame in looking to borrow. If it weren't for business lending in its many forms, many small businesses would never make it.
Business lending is a great tool when used properly. It can help finance growth or pay for capitol investments. It makes it possible for business owners to invest in real estate. Business lending can even help businesses better manage cash flow. With so many readily available funding options, there aren't many financial needs that cannot be met with some form of lending.
Are you in need of alternative business loan? Our primary mission is to connect business owners and entrepreneurs with funding sources. We work with our clients and partners to align financing for a variety of needs. Moreover, we work with industries that retail and commercial banks will not touch. It's all part of our commitment to being a reliable funding partner for small business.