The business landscape constantly changes. It’s challenging to get the financing needed to remain competitive, particularly if lenders are wary about small businesses.
Traditional financing may not be available for new businesses (less than two years) or for smaller loan amounts (less than $250,000). If your business credit isn’t firmly established, you’ll also struggle to get a loan.
Data from the Federal Reserve shows more than four in 10 SBA loans were rejected in 2017. As a result, business owners are relying on alternative financing for support.
Alternative Financing Advantages
Alternative financing can be used for the myriad needs of small businesses, from new product launches, to equipment purchases and expansions. Here are several reasons why alternative financing is appealing:
- Holistic Approach to Qualifications – Alternative lenders look beyond basic credit reports when assessing your ability to repay a loan. Their more comprehensive approach is considered by some to be fairer and more balanced.
- Many Options – Unlike the large loans preferred by traditional lenders, alternative financiers are more flexible, offering lines of credit and smaller loans. Businesses pay only on the amount in use, helping the owner meet cash needs without taking on large amounts of debt.
- Attractive Interest Rates – The competitive nature of alternative lending keeps interest rates lower than traditional banks.
- Quick Approvals – Business owners can use alternative lenders’ online applications and processes to get cash infusions within a week or sometimes within hours.
Examples of Alternative Financing
The list of options is long and evolving, but here are several frequently used sources of alternative financing:
- Microloans – usually with a five-year repayment, these loans are less than $250,000.
- Crowdfunding – individuals provide money either as a donation or for company equity.
- Cash Advances – future credit card sales are collateral for this type of loan.
- Peer-to-peer networks – these loans exist outside banks, with lenders financing 36 to 60-month repayment plans.
Contact Bear River Financial to find the right financial tool for your industry and business model. Our products will grow with you.