Alternative lending is catching on for a reason: business owners need capital to grow their business, and traditional banks are making it harder and harder to raise capital. While the reasons for this stem from economic policies outside the scope of a general discussion, the simple fact is that businesses still need capital. Alternative lending is catching on for a number of reasons with small businesses, but the biggest reason is that it works.
How Alternative Lending Helps Small Businesses
The biggest difference between alternative lenders and traditional banks comes down to transparency. According to the Federal Reserve Bank of Cleveland, half of small business loans requested are not approved, and the reasons why are not always clear. With alternative lenders, the lender is focused on whether your business is productive, and the lender is focused on profiting while helping the business stay that way. While interest rates are higher, this is primarily due to the fact that the lender needs to keep its doors open. Meanwhile, businesses have access to the funding they need to grow and thrive.
Alternative Lending is Easier for Today’s Needs
The requirements for cash advances are usually very simple: demonstration of the ability to pay and basic understanding of the business needs. It’s just not complicated. Alternative Lending exists because older loan models are designed around creditworthiness (something that is even being disputed now, as alternative credit rating systems are now coming into play.
Today’s lending environment is one where businesses need capital faster than ever before, and traditional banking (even subsidized traditional banking) just isn’t cutting it where modern business needs it the most– access to capital quickly in a changing business world. Because of this, alternative lenders stick to the basics, keeping business running at its proper speed.