How Alternative Lending Has Helped The US Economy And How It Works

How Alternative Lending Has Helped The US Economy And How It Works

/in /by

According to the Small Business Administration, more than half of Americans own or work for a small business. In fact, small businesses create about two out of every three new jobs in the United States each year, making them an integral part of our economy.

Despite this importance, many small businesses continue to have a hard time securing the funding they need to grow and thrive – at least through traditional banking. If you’re a small business owner, you may have already learned this the hard way.

Why is it so hard for a small business to get a traditional loan? Let’s take the example of a small retail boutique owner who needs a loan but has little to offer in assets to secure it. Say this owner goes to her local bank and applies for a $20,000 loan. The odds are she won’t get a loan approval, but will instead walk away with a credit card application. This is because from a bank’s perspective, that’s about all they can do. Loans of this size simply are not profitable. The cost and considerable manpower required to process them don’t really move the needle for the bank.

In contrast, more agile online lenders such as Premier Business Lending leverage technology to cost-efficiently process hundreds of applications a month. This makes it entirely feasible for us to work with small business owners whose loan needs aren’t as large. In fact, we strive to deliver the best alternative to traditional bank loans by making our terms fair and our application process as easy, fast, and straightforward as possible.

The American economy relies upon small businesses for stability and growth. However, to grow, expand and ultimately succeed, small businesses require consistent and reliable access to capital. According to the U.S. Small Business Administration’s Office of Advocacy, young firms rely heavily on external debt, receiving about three-quarters of their funds from banks via loans, credit cards and lines of credit.

Data provided by the Office of Advocacy reveals that in 2013, over 5.4 million loans were approved for small businesses. Borrowing amounted to about $1 trillion — including $585 billion in outstanding business loans and $422 billion in credit from finance companies, with the rest from a mix of sources. The increased demand for quick and easy access to working capital has sparked fierce competition among lenders to provide alternative lending options that meet the needs of small businesses; however, the type of financing they require will vary depending on the industry and stage of the business.

Here are four principal reasons that small businesses need to borrow money and some alternative lending options available for each:
 

1. Starting a Business

The average cost to start a business can range anywhere from a few thousand dollars to over $30,000, depending on the nature of your business. It is often difficult to get approved for a loan because most lenders want to see a track record of success and profit.

If you’re starting a business and need start-up capital, first figure out how much you need. Then, look into raising the necessary funds. If securing a bank loan isn’t possible, consider reaching out to your immediate network of family and friends to raise the initial seed money or seek crowd funding agencies.
 

2. Expansion

Once you have your business off the ground and have established a track record of success, it may still be difficult to obtain a small business loan to finance business-growth operations. Premier Business Lending offers a credible alternative for businesses to get a quick loan.

In order to qualify, you must have at least $100,000 in revenue at the end of your first year in business, and a credit score of at least 500.
 

3. Purchasing Inventory

Product or retail-oriented businesses often require financing to purchase additional inventory, keep their shelves stocked and maintain profitability and reputation. Due to seasonal shifts in the number of sales and cash flow, businesses may experience a greater demand for a product at certain times of the year. An inventory loan can help bridge that gap.
 

4. Strengthening the Firm

Revenue-based financing is a great alternative for businesses that are growing and/or have a fluctuating cash flow that requires a more consistent stream of funds to keep the business running strong. There really isn’t a “one size fits all” lending solution for every business.

Chris Wilcox, Managing Partner with Premier Business Lending says “You’re going to want to choose alternative lenders that are focused on improving the experience, when applying for capital. If you’re an early-stage business or a start-up, focus on microlenders that have online loan applications. If you’re a later-stage business, focus on nonbank Alternative lenders that have online loan applications, or community banks/credit unions that have online loan applications.”
 

A multitude of options are available for small businesses to obtain the capital they need to start up, sustain operations, expand and ultimately succeed. Having a solid understanding of the options available and how they meet your business needs is key to determining the lending option that is not only best for your small business, but will offer a quick turnaround and quality user experience.

What is Alternative Lending?

What is Alternative Lending?

/in /by

Many of our clients first come to us with little or no knowledge of the alternative lending industry. Most simply have a need for additional capital and have been turned down by traditional “big bank” lenders and are unaware of the many alternative lending options available on the market today.

In fact, big bank lenders approved a record-low 14.8% of small business loan requests in October, 2012. As more business owners and start-up companies become frustrated with traditional lenders and come to Premier Business Lending for answers, we thought now would be a great time to answer a few questions about the steadily growing alternative lending industry.
 

What Exactly Is Alternative Lending?

Alternative lending is a broad term used to describe the wide range of loan options available to consumers and business owners outside of a traditional bank loan. These alternative options are most commonly used when an individual or business owner cannot obtain a traditional bank loan for any number of reasons.

Alternative lenders specialize in utilizing overlooked sources of collateral such as real estate or even outstanding invoices to secure the loan. They are typically more flexible than banks when it comes to repayment schedules and loan approval and often provide cash much faster than their traditional banking counterparts.

The alternative lending industry is well established and generally staffed by well respected members of the financial services community.
 

But Aren’t Alternative Loans Too Expensive?

While alternative loans may sometimes have higher interest rates than traditional bank loans, they fill the gap for small businesses everywhere, providing much needed funding for cash-strapped businesses that have been unable to obtain a loan or line of credit from traditional banks.

This gives business owners the opportunity to invest back into the business, manage cash flow and continue to operate for years to come. Any reputable alternative lender will speak with you at length about the best loan program for your business.
 

What Types of Alternative Loans Are Available?

There are many different types of alternative loans and several methods for collection as well. Premier Business Lending commonly handles hybrid business lines of credit and asset-based lending for our clients, both of which are good sources of fast, liquid capital for business owners.

Other types of alternative loans include medical practice loans which are designed to help grow medical practices, export loans for export businesses, and equity investment loans in which the lender purchases equity in the borrower’s business.