Every business requires funds to operate, thrive, and grow. Frequently, outside funds are necessary to meet each business’s needs. Your first thought to get those funds may be to secure a bank loan. But if the banks let you down, then alternative lending may be the source you are looking for.

What is Alternative Lending

Alternative lending describes any type of lending that takes place outside of traditional lenders like banks or credit unions. Types of alternative lenders include direct online lenders, private lenders, marketplace lenders, and crowdfunding platforms.

Alternative lending is innovative in the lending space. It can take the forms of lines of credit, short-term loans, installment loans, merchant cash advances, microloans, invoice factoring, bridge loans, and equipment financing, so there are many options to choose from.

The Reasons that Banks Turn Down Loan Applications

The reasons that banks and credit unions turn down loan applications include:

  • Too little time in business
  • Lack of compelling business experience
  • Concerns with the management team
  • A poor credit history
  • Cash flow issues
  • A poor debt-to-income ratio
  • Lack of satisfactory collateral
  • Too small or too large of a loan request
  • Poor reasons for a loan.

What Are the Advantages and Disadvantages of Alternative Lending

The advantages of alternative lending compared to traditional lending include offering an easier and less rigorous loan application process, faster funding for both loan approval and funding delivery, higher approval rates, more loan options, and no restrictions on how the funds are used. The disadvantages of alternative lending can include higher interest rates, shorter terms, and more frequent payments.

When Does Alternative Lending Make Sense

Alternative lending makes sense especially when your business doesn’t meet the strict underwriting criteria of a bank or credit union, you need funding quickly, you need a smaller loan, or you’ve been in business less than two years.

Seek Expert Financing Assistance

Contact Array Financial, based in Raleigh, NC. We offer a wide variety of funding options with quick and flexible financing to meet the needs and goals of small businesses.