Small Business Financing Solutions: Alternative Lending
The number of banks willing to take a financial risk on small businesses has dropped exponentially over the last decade. This has led many small business owners to turn to alternative lenders in order to grow and sustain their companies.
Why Consider Alternative Lending?
Money is necessary for every business. From the day to day activities to expansion and the implementation of new ideas, capital is what powers everything. When a bank chooses not to loan a company money, the business owner will need to find another way to fund their venture or find themselves in a state of professional stagnation.
Smart borrowing means carefully considering all of your financing options. Not all lenders are created equal, and some alternative lenders are predatory.
Potential Pitfalls of Alternative Lending
Because small business owners need capital, they find themselves at the mercy of alternative lenders. Some of these lenders will charge unfairly high interest rates and expect a faster turnaround time on repayment. They’re able to make fast approval decisions based on the collection of data indicating the spending potential of the business owner. This can bypass credit requirements and result in loans that are based on profit instead of a careful assessment of risk.
Take Measures to Protect Yourself
Before you jump at the first alternative lender willing to approve a loan, there are a few things to consider:
- Do Your Homework: Don’t make any hasty decisions when choosing a lender. Research their lending practices and make sure that you’re being treated fairly. Committing to anything prior to fully understanding all of the terms and repayment options is a huge mistake.
- Ask Your Bank: Even if you are unable to get approved for a traditional loan, it doesn’t mean that traditional lenders don’t have other options. Some banks have started to collaborate with alternative lenders to create small business financing packages that are both fair and protected.
- Consult with an Attorney: You don’t have to retain an attorney full-time to have one look over your loan documents prior to signing them. It’s a good idea to have legal counsel approve your loan documents before you lock yourself into an agreement that ends up being predatory or one-sided.
For more information on how to finance your small business with a company that you can trust, contact Ironhorse today.