Advantages of Using Alternative Lending

Banks have an important place in commerce. After all, companies frequently need to make large purchases that drive growth. These may include expensive construction equipment, real estate or vehicles for the company fleet. For all of these options, long-term loans from a bank can deliver low interest rates and long repayment times. Unfortunately, qualifying for this type of loan can be a lengthy and complicated process, and sometimes loan applications are flat-out rejected. That’s when an alternative lender can come in very handy.

What Is Alternative Lending?

Alternative lenders provide financing in nontraditional ways. They’re frequently smaller than banks, and they may focus on one or more types of loans. For example, some alternative lenders are completely dedicated to financing equipment purchases. Others accept valuable business assets such as invoices or credit card sales to extend a merchant cash advance.

What Are the Benefits of Alternative Lending?

Why would a business opt for alternative financing instead of a normal bank loan? There are three main reasons why alternative lenders can be attractive for small business owners:

1. Loans That Don’t Require Collateral

Most types of bank financing require you to place an expensive business asset as collateral. Collateral acts as a guarantee that your business will repay the loan. For example, if you want to borrow money for a vehicle, you may have to use a piece of real estate as collateral. Some owners don’t like this, since missing too many payments can make you lose the asset. Also, not every business has the amount of collateral needed to qualify, especially startups.

In these circumstances, alternative financing can be a better option. You don’t usually need to offer any type of collateral. Factoring lets you use unpaid invoices as an asset, and equipment leasing lets you pay a kind of rent to get high-tech equipment.

2. Fast Financing

Loans take weeks or months for approval. On the other hand, alternative types of lending are usually ready to go in a few days. This can be a huge help in keeping the lights on at your place of business. You can buy inventory, pay taxes or hire more employees for seasonal needs.

3. Solutions for Companies With Poor Credit

A poor credit rating makes it hard to qualify for a traditional loan. However, with alternative lending, you have nothing to worry about. What matters is the value of your invoices or equipment, not your credit history.

These methods of financing are completely trustworthy. They just operate a little differently than normal bank loans. If getting a traditional loan seems impossible, check out what these alternatives can do for you.


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