Alternative lenders have surged in popularity over the years. This post takes a look at why by highlighting several advantages alternative lending offers over traditional financing methods.
Lower Interest Rates than Credit Cards
Many entrepreneurs have difficulty obtaining financing from traditional banks, which tend to prioritize long records of business success. That hurdle often leads business owners to turn to business credit cards for their financing needs, which carry high-interest rates. Because they frequently offer lower interest rates than credit cards, alternative lenders can serve as an attractive replacement.
As pointed out on the entrepreneur-focused website Small Biz Club, alternative lending offers the advantage of being speedier than traditional financing options. When a business faces a cash crunch that squeezes its finances or sees an opportunity to pounce on an exciting new venture, an old-school business loan from a bank often will not be approved fast enough to help. Alternative lending can provide money to a borrower within a matter of days, while banks can take months to do so.
When it comes to repayment setups, alternative lending is very flexible. For example, accounts receivable financing allows businesses to immediately access funding in exchange for unpaid invoices. Many alternative lenders offer that option, along with several other setups, such as business lines of credit. The variety of options makes it easier to find a solution that fits a borrower’s specific needs and ability to repay.
Lower Barriers to Entry
Generally speaking, alternative lending offers a much easier path to financing, especially for newer companies or companies with less-than-stellar credit histories. Banks commonly require extremely strong credit scores before extending financing. Alternative lenders are not as stringent, making it easier for businesses that or new or have faced rough patches to get the funds they need.
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