In your quest to finance your small business, you might have heard of something called alternative lending. Because this type of lending is so new, there’s still a lot of misconception swirling around the business and consumer world. To clear up some of the confusion, educate yourself on five of the biggest misconceptions concerning alternative financing.
Anyone Can Be Approved
Just because the lending process is a bit more relaxed for alternative financing doesn’t mean each and every business owner who applies will be approved. Alternative lenders have their standards just like traditional lenders and banks do, mainly because they want to take steps to ensure they aren’t taking on a borrower who might later become a risk. To improve your chances of being approved, you’ll want to pay all of your bills on time, ensure your commercial cash flows are well maintained and create a thorough business plan detailing how you plan on using alternative lending.
You Won’t Be Approved for a Loan If You Have Bad Credit
Alternative lenders don’t place as much focus on the applicant’s credit score as most traditional banks. While a business owner may not have the best credit, she or he might be able to pay bills on time, not have much debt and have a sustainable business. These are all qualifications that could shoot the owner’s chances of being approved to the top.
Alternative Lenders Are Neither Regulated nor Reliable
The same consumer protection regulations that apply to traditional banks apply to alternative lenders, which is mainly because the lenders receive funding money from banks.
Alternative Loan Payments Are Too High
While interest rates for alternative lending are often higher than those for traditional business loans, they are affordable. Something to bear in mind when it comes to alternative loans is that they’re paid back through a percentage of your business’s sales rather than a fixed monthly payment. One of the great things about this is that you don’t have to worry as much about paying your loan back when business starts to slow down.
It Takes a While to Receive Your Alternative Loan
While you’ll likely have to wait several weeks or possibly even months to receive money from a traditional loan, you can receive money from alternative lending in as few as 24 hours.
Now that you’re better informed about alternative loans for small business owners, it’s time to put that knowledge to good use. Explore your options for alternative financing today.