If your dream is to start a new business, you may be dreading applying for a traditional bank loan. However, the last ten years have created a market for alternative loans to flourish. Many SBOs are bypassing banks and choosing these types of loans because the options are endless, qualifications are less strict, the applications processes are faster and simple, and have less risks. Let’s go further into the reasons why SBOs are choosing alternative financing.
- Less Strict Qualifications
It is much easier to qualify for an alternative loan than with a traditional loan. In general, all applicants will have to prove is that they are able to repay the loan. Lenders determine loan amounts and worthiness with a variety of tools that access credit reports, company history, and use other comprehensive financial information that extends beyond credit history. As a result, alternative financing is thought to be fairer and more balanced than traditional loan decisions.
- Faster Approval Process
Banks and credit unions often have a longer approval process that extend over weeks or even months. This process doesn’t lend itself to quick financing. Meanwhile alternative lenders, especially those that function online, can approve applications within hours.
- Many Options
Traditional banks generally don’t give out loans less than $200,000. This means you are out of luck if you need less than this amount. And who wants to request large sums of money that they will have to repay later?
Many small businesses seek out loans for emergency situations and medium sized fixes that don’t require such large amounts of capital. There are a variety of alternative lenders that lend hundreds to hundreds of thousands of dollars. Some types of alternative lending include: micro lenders, crowdsourcing, angel investors, merchant cash advance, business line of credit, family and friends and more.
- Lower Interest Rates
There is little wiggle room in terms of interest rates in the traditional lending market. However, the alternative lending market is competitive, which can drive down interest rates. Plus alternative lenders use more comprehensive information about applicants, which allows them to offer lower interest rates to particular applicants. But owners should always read the fine print before signing. Some alternative lenders do charge very high interest rates in exchange for quick cash.
First American Merchant offers high risk cash advances to high risk merchants. FAM offers simple, flexible loan programs that will give your business critical funds in less than 72 hours. Applicants won’t need to supply tax returns or financials. Get the money your business desperately needs.