There are many options for financial support when businesses need capital or an influx of cash. One option that has been gaining attention over the last ten years is alternative lending. This article provides an explanation of alternative lending as it applies to businesses.

An Overview of Alternative Lending

As implied by the name, alternative lending is financial lending that is alternate to traditional bank lending. Alternative lending happens outside of traditional banking institutions. In today’s society, that often refers to companies that work online specifically to provide loans to individuals and businesses. The sole purpose of these companies is to provide loans but they are not banks.

Since these institutions operate outside of traditional banking institutions, they are not required to hold to some of the same requirements and regulations that govern traditional bank lenders. It is for this reason that alternative lending can be attractive to businesses. With the tumultuous financial stability of society, particularly in businesses following the global recession in the early 2000s, alternative lending provides an opportunity for financing for individuals and businesses that would otherwise not qualify for loans.

The Advantages and Disadvantages of Alternative Lending

As with any financial solution, there are advantages and disadvantages of alternative lending. Examining these factors can help you determine whether alternative lending is the best solution for you.

Advantages:

  • Easy and fast application process
  • Flexibility in underwriting
  • Loan diversity

Disadvantages:

  • Higher expense
  • More restrictive terms
  • More frequent repayment expectations

Alternative Lending v. Traditional Bank Lending

Alternative lending is generally faster than traditional lending. This not only applies to the application and approval process, but the shorter terms and more frequent repayment terms, as well. Alternative lenders often have more diverse loan options in comparison to traditional bank lenders. Alternative lenders are also more accessible, making applications and information more widely available online.

For more alternative lending options, contact us today.