In the past, small business owners had one option for a loan – their local bank. Today, there are hundreds of online alternative lenders that facilitate fast loans for small business owners. Here are advantages and disadvantages of working with an alternative lender or a traditional bank.
Alternative lending is the process of providing business loans outside of traditional routes. Alternative lenders can provide more flexible loan options, giving more people the chance to qualify for a business loan.
New technology platforms, alternative lenders, and online marketplaces each aim to make capital more accessible. Following these technological advancements, online lending began to grow as a source of funding for small businesses. In 2017, for example, 24% of firms applied for funding directly from online lenders. As they became more popular, three financing products emerged:
A merchant cash advance (MCA) can be a quick fix for small business owners. MCAs can be a fit for those who need short-term financial assistance or have been denied a traditional bank loan because of poor credit scores or weak business financials. However, cash advance loans can cost you a bundle. Before you consider applying for one, make sure you do your research. The SmartBiz Blog has in-depth articles on this option:
Peer-to-peer lending came onto the scene when the Great Recession of 2008 and 2009 made it nearly impossible for small businesses to get bank loans. Recognizing a need, online marketplaces were founded that connect businesses with individuals who have money to lend. However, buyer beware. Review the reasons outlined below to reconsider this funding option: 4 Reasons Small Businesses Should Avoid Peer-to-Peer Lending.
Marketplaces offer lots of educational content to educate borrowers on funding options that they’re eligible for. They can’t extend direct financing, so small business owners might find themselves applying for a costly loan product.
These are the major benefits:
Consider these disadvantages before you start working with an alternative lender.
A small business bank loan is when a bank offers to lend money to a business for a certain time period. The borrower pays a certain amount of interest for the life of the loan.
SmartBiz Loans is not a bank or an alternative lender. SmartBiz is the leading online bank network for SBA loans and assists small businesses to apply for these loans through its network of preferred SBA lending banks. Approval rates are increased by matching small businesses with the bank most likely to say “yes” to their loan. SmartBiz offers the “gold standard” in small business lending, SBA loans. Bank term loans and more financing options are also available. Learn more on the SmartBiz Loans website:
SmartBiz has an online application through an easy-to-use dashboard. Additionally, small business financial experts are on hand to answer any questions and offer assistance. If you’re ready to apply, start an application and discover if you’re prequalified in about 5 minutes.