Long wait times, complicated contracts and services, and support that misses the mark; this is what many small business owners deal with when trying to secure financing. Banks can keep you waiting weeks or months to tell you that you’ve been denied funds in the end. The very next question is, where do I go from here?
If you’re looking for funding, you’ll be glad to hear there are other ways to secure the funding you need. In fact, these alternatives often turn out to be better for many business owners. The following information should shed some light on why you might be struggling to secure funds and where you should go next.
Why is Securing Bank Loans So Difficult?
There are several reasons why it’s hard to secure a traditional bank loan. For the most part, the bank financing process is outdated and labor-intensive. Regulations are also incredibly unfavorable for startups, local stores, and small businesses. Banks want to see a healthy business financial history (typically a five-year profile) and a strong credit score – two things startups and new businesses do not have to offer.
Reasons Businesses Turn to Alternative Business Loans
Here are just a few of the top reasons why businesses that find themselves in this situation find alternative financing appealing:
- Favorable credit requirements. While traditional banks turn down borrowers with less than stellar credit scores, alternative lenders are known for working with those who are struggling with credit (even helping them improve it)
- Fast approval. Banks may take weeks to be approved, but alternative lenders can give you access to funds in as little as 24 hours.
- Simple, straightforward qualification. Many small business owners fail to meet the requirements of outdated traditional lending, which is where the simple qualification requirements of an alternative lender really come in handy.
Alternative Lending Options
Today, there are many different alternative lenders. The key is to search for a lender that regularly tackles the obstacles you face, from rapid growth and chargebacks to high-volume tickets. Another important question to ask, is which lender specializes in your industry?
Here are a few of the most popular alternative lending options you should consider:
Invoice factoring. Also known as invoice financing, factoring allows you to secure money upfront for your outstanding accounts receivable. This money is then repaid when your customer pays their invoice. Ultimately, this allows you to close that crippling pay gap so you can accept new projects more quickly.
Merchant cash advances. The very opposite of a small business loan in terms of structure and affordability, a merchant cash advance allows your business to obtain a lump-sum amount in exchange for a portion of your credit and debit card sales. Each time a sale is made, the provider takes a small cut until the advance is repaid.
Microloans. Many business owners with little to no collateral are able to use this option to secure funds. Keep in mind, however, that this financing tool does have restrictions on how you can spend the money.
Raising money for your business can be hard. But setting aside some time to consider all of your options can open new doors of opportunity for your business and its growth. Just be sure to compare all of your options, including cost, experience, and customer reviews. Partner with a provider that specializes in working with your industry and offers industry-leading costs and services.