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The Many Advantages of Pursuing Alternative Lending For Your Business

Written by Banks Editorial Team

Updated April 16, 2024​

3 min. read​

alternative lending

Although traditional lending options can be a valuable asset, you may have to look at alternative lending if you are a small business since you may have difficulty traditionally receiving financing.

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What Is Alternative Lending?

Alternative lending offers a beneficial solution, making loans more accessible to businesses that would otherwise face challenges. This type of lending takes place outside traditional banking. It may include nonbanks, a kind of financial institution that can offer many banking services but does not have a banking license.

5 Reasons to Use Alternative Lending

Working with traditional banks, it can be hard to feel as though you are being listened to. For small businesses without significant amounts of resources already in hand, it may be untenable to put forth the time and effort that it takes even to attempt to receive funding through big banks. Alternative lending offers many significant benefits in place of traditional banking solutions. Here are five of the key advantages of opting for alternative lending.

1. Easy and Quick Application Process

Alternative lenders offer an application process that typically takes mere minutes to complete. This is excellent for any business but can be particularly advantageous for smaller companies to get them up and running as quickly as possible with a minimal amount of downtime.

2. Get Funding Even If Banks Won’t Lend to You

Unfortunately, economic situations such as the 2008 financial crisis and the COVID-19 recession mean traditional banks are often highly selective when reviewing small business funding applications. This means that even if you have a strong business plan, you may struggle to receive funding simply because your business does not fit within the narrow guidelines that the bank considers ideal. As such, many excellent companies miss out on funding opportunities if they exclusively consider traditional funding options.

Alternative lenders offer the significant advantage of flexibility. These nonbank facilities do not face the same restrictions as big banks, meaning that they can often provide funding in situations where banks may have rejected it.

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3. Customized Approvals

Since large banks work with so many businesses, the experience is significantly less personalized than when working with an alternative lender. Big banks’ structure means that they typically offer the same type of loan to most of the businesses they work with, notably smaller businesses.

Opting for an alternative lender means that you can create a personalized loan to your specific needs. Typically, these types of lenders can take the time to sit down with you, learn about your business, and assess your long-term goals and financial situation to determine the best loan for both you and the lender. Whether you need a short-term loan to cover your start-up costs or a long-term loan to help get your business properly up and running, an alternative lender will be able to take the time to help create the best solution for you.

4. Valuable Relationships

While working with banks may sometimes feel more transactional, alternative lenders provide a personalized, one-on-one relationship that is immensely valuable when navigating the world of small business loans. These lenders will treat you like a business partner rather than an anonymous client and take the necessary time to connect with you and fully understand your business and needs. In this way, both you and the lender will be able to work together to develop unique, specialized solutions that will best serve you and your business.

5. Available for a Wide Variety of Industries

Every industry has different needs when it comes to funding, and these varying requirements are often challenging for big banks to accommodate. Due to the personalized nature of alternative lending, it is ideal for meeting the needs of a range of different professional sectors.

3 Alternative Lending Examples

Alternative lending is highly customizable, but it can still help examine different examples of loans granted by an alternative lender to get a sense of possible options.

  1. Alternative Lending Example 1: In this example, the borrower was approved for a loan of $132,383. This loan was repaid weekly on a 32-month schedule, with an average monthly payment of $4,964.22.
  2. Alternative Lending Example 2: In example 2, $36,000 was approved, and $35,180.05 was funded. This loan had a 13-month term and was repaid weekly with an average monthly payment of $3,088.51.
  3. Alternative Lending Example 3: Finally, $36,000 was approved, and $34,634.05 was funded. This 12-month loan was repaid weekly, with an average monthly payment of $3,269.34.
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How to Get Started with Alternative Lending

There are typically some simple steps you need to take to get funded by an alternative lender. The information you will typically need after completing your application includes:

  • Your company’s address and phone number
  • Your banking information
  • Your daily sales numbers

You will then need to choose the type of business loan you desire, the amount you need to receive, and your payment terms. For certain types of loans, you may be asked to upload additional documents. These could include:

  • A government-issued photo ID
  • A voided check from your company’s business accounts
  • Three months of credit card statements

Finally, you will receive your funds once your loan has been approved. Although the time for approval can vary, it is typically rapid, with some applicants receiving their funds on the same day they apply for the loan.

Overall, alternative lending is an excellent choice for small business owners and anyone who has struggled to obtain funding from traditional banking facilities. This personalized approach makes it possible for you to connect with your lender and ensure that you receive a funding solution that is specifically tailored to your unique needs.

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