Starting a business is expensive, and the initial process of securing financing can be stressful and time-consuming. Unfortunately, to some degree, this is an inevitable part of starting a new enterprise. But it is important to consider your options — and when starting a business, that means considering alternative lending options in addition to conventional lending options. These financing possibilities may offer you more flexibility and latitude than you would receive via a typical commercial bank loan. Below are a few reasons to consider an alternative means of financing, as well as some examples of lending possibilities.
Your Past Financial History May Be Less Important
Alternative lenders may not require the same stringent documentation that conventional lenders will when applying for a business loan. Many commercial loans are quite difficult to access if you have a limited business history, prohibitively low credit score, or do not meet other requirements.
Under alternative lending, conditions for obtaining access to a loan will vary widely depending on lenders. While some loans may still be difficult to access, others may be more open for new entrepreneurs.
There Are Multiple Options
One of the biggest advantages to an alternative loan is the multitude of options that are available to prospective borrowers. Simply put, alternative lending encompasses a wide array of loans. A few of the loan types below may be worth considering as you work to fund a business:
• While not necessarily an “alternative” loan, SBA loans offer typically reasonable terms to new business owners who can access them
• Asset-based loans are a great option for raising quick cash, if you have access to a valuable “asset” to borrow against, like a piece of real estate, a vehicle, or expensive equipment
• Crowdfunding is an interesting alternative financing option, involving raising money from the “crowd” — typically either a large pool of small donors, or a few wealthy donors — to invest in your business
There May Be More Flexibility in Terms of Loan Criteria
A final potential advantage of alternative financing is that there may be more negotiating flexibility on loan terms. This will vary depending on loan type, but at least in some cases, a loan will be negotiated directly between you and your lender, potentially allowing you to come to an agreement that works for both.
Ultimately, alternative financing offers some creative means to fund a small business, and may be worth considering as you work to make your business dreams a reality.