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6 Things You Need to Know About Alternative Business Lending

Published By Faith Stewart at February 17th, 2021

6 Things You Need to Know About Alternative Business Lending

Alternative business lending rose from the ashes of the 2008 crash. This was a time when lenders were giving almost no one money.  It was virtually impossible to get a loan of any sort for any reason. Business loans were extremely hard to come by, and when you could get one, rates were terrible. 

Alternative Business Lending: Your Questions Answered

alternative business lending Credit Suite3 - 6 Things You Need to Know About Alternative Business Lending

Find out why so many companies use our proven methods to get business loans. 

As a result, alternative lenders began to pop up. Funding Circle is credited with being the first, but others soon followed. That means this is a fairly new game.  It can be hard to figure out if it is one you should play. This should help. 

  1. What is alternative business lending? 

alternative business lending Credit Suite - 6 Things You Need to Know About Alternative Business LendingThis type of lending is offered through private companies, not traditional financial institutions like banks and credit unions. They can be an option for those who do not qualify or who do not have the time to wait for a bank loan. These lenders explore other ways of verifying creditworthiness and other forms of collateral. 

Collateral may include credit card transactions, open invoices, equipment, real estate and more. 

  1. How much is alternative business lending?

This is a question asked by many when they first start considering alternative lending options.  The truth is, it depends. That’s the case with any loan.  There are fees, and interest is a factor.  Typically interest is higher with alternative lending. But if you can’t get anything else, you can’t really compare.  

  1. What are the pros of alternative business lending? 

So, why choose alternative lending? Well, if you can’t get a traditional business loan you may need to consider this option. However, there are other reasons as well. For example, alternative lenders typically fund much faster. So, if you need fast cash, this could be the way to go. 

Also, the application process is usually faster and easier. Often you can apply online in a matter of minutes. Repayment terms are usually more flexible as well. 

  1. What are the cons of alternative lending?

As already mentioned, interest rates with alternative loans are usually higher. There is also a breeding ground for scammers in this industry.  It’s important to know how to recognize predatory lending practices to avoid being taken advantage of.

  1. Is alternative business lending right for you? 

If something is blocking you from being approved for a loan through a bank or credit union, then the answer to this question is probably yes. It is highly likely that this is a type of lending that can work well for your business. This is especially true if you have invoices, accept credit card payments, or need to finance equipment. Common types of alternative loans include: 

  • Merchant cash advances
  • Invoice financing
  • Equipment financing
  • And  real estate financing

There are other options as well, and they vary between lenders. These are some of the most 

common however. 

  1. A credit expert can help you find the best alternative business funding for your business. 

Now you need to figure out which lender and which products from that lender will work best for your specific business needs and goals.  The best choice is to work with a business credit expert.  This is someone that can help your maneuver through the process in the most effective and efficient way.  That will help immediately.  Beyond that, into the long-term, an expert in business credit can help you figure out why you are being denied funding, and help you fix the problem. 

Where should  you start when looking for alternative lenders? Here are some options to consider. 
alternative business lending Credit Suite3 - 6 Things You Need to Know About Alternative Business Lending

Find out why so many companies use our proven methods to get business loans. 

Fundbox

Fundbox offers a line of credit rather than a loan.  Still, it is a great funding option because there is no minimum credit score requirement. 

 They offer an automated process that is super-fast. Repayments are automatic, meaning they draft them electronically, and they occur on a weekly basis.  One thing to remember is that you could have a repayment as high as 5 to 7% of the amount you have drawn currently, as the repayment period is comparatively short.  This means you need to be sure you have enough funds in whatever account you connect them to so that it can cover your payment to Fundbox  each week. 

 BlueVine 

You will find with most any online lender, they often offer options more similar to invoice factoring and lines of credit.  This is because those options present fewer risks than straight term loans.  BlueVine is no different. 

Upstart

Upstart is an online lender that uses a completely innovative platform for loans.  The company itself questions the ability of financial information and FICO on their own to truly determine the risk of lending to a specific borrower.  Instead, they choose to use a combination of artificial intelligence (AI) and machine learning to gather alternative data for use in making credit decisions.

This may include such things as mobile phone bills, rent, deposits, withdrawals, and even other information less directly tied to finances.  The software they use learns and improves on its own. You can use their online quote tool to play with different amounts and terms to see the various interest rate possibilities.  

Upstart’s innovative platform makes them one to research for sure. 

Fora Financial 

Founded in 2008 by college roommates, online lender Fora Financial now funds more than $1.3 million in working capital around the United States. There is no minimum credit score, and there is an early repayment discount if you qualify. 

 OnDeck 

Obtaining financing from OnDeck is quick and easy. First, you apply the OnDeck website and receive your decision once application processing is complete. If you receive approval, your loan funds will go directly to your bank account. The loan amounts range up to $500,000.

 Lending Club

Popular online lender Lending Club offers term loans.  You can get a quote in less than 5 minutes. Funds are available in as little as 48 hours if approved. There are no prepayment penalties.

Kiva 

Kiva is an online lender that is a little different. For example, the interest rate is 0%.  That means even though you have to pay it back, it is absolutely free money. They don’t even check your credit. However, there is one catch.  You have to get at least 5 family members or friends to throw some money in the pot as well. In addition, you have to pitch in a $25 loan to another business on the platform. 
alternative business lending Credit Suite3 - 6 Things You Need to Know About Alternative Business Lending

Find out why so many companies use our proven methods to get business loans. 

Accion 

If your personal credit is okay, Accion may be a good fit for small business startup loans. It is a microlender, a nonprofit, that offers installment loans to both startups and already existing businesses. 

 Credibly 

Credibly is also a good option for business loans if you are already generating some revenue. They offer short term loans for both business expansion and working capital. You must be in business for at least 6 months to qualify, and Credibly will approve loans to those with credit scores as low as 500. 

Alternative Business Lending Is a Great Tool, but Not a Forever Answer

I mean, it could be a forever answer, but there is a better way.  If you work to build up your fundability, you can get a lot of perks offered by alternative business lending with the interest rates offered by traditional loans.  You could have the best of both worlds.  It takes time to get there however, and alternative loans are the best option for many in the meantime. 

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