For small business owners, getting funding from a bank or other traditional lenders can be a hassle. These institutions often require a significant amount of documentation, and the approval process may take weeks. If your business is fairly new or your credit isn’t great, you may even find that you have trouble getting approved.
Luckily, alternative lenders are growing in popularity and can often be a much better option for small business owners. These lenders typically have more lenient qualification requirements, request less information, and offer fast approvals. However, with so many lenders to choose from, deciding which one is right for you can be a bit confusing. As you evaluate a potential lender, be sure to ask these six important questions.
1. How Long Has the Company Been in Business?
Since alternative lending for small business has been growing in popularity, there are now many new lenders on the scene. While there isn’t necessarily anything wrong with using a newer lender, you may feel more comfortable working with a company that has been in business for a long time and has a proven track record.
2. Are They a Direct Lender or a Broker?
A broker works as an intermediary, pairing consumers with lenders and helping you shop around for the best option for your needs. However, this comes at a cost. Brokers charge a fee for their services and using a broker as a middleman can slow down the entire process.
Direct lenders approve and finance loans directly. Doing your own research and finding a direct lender you want to work with can save you time and money. Once you’re working with the lender, you can also typically expect fast turn-around times.
3. What Types of Products Do They Offer?
As you’re evaluating alternative lenders for small businesses, you’ll need to understand which types of lending solutions they offer. There are many different options, including merchant cash advances, small business loans, equipment loans, invoice financing, peer-to-peer lending, and more.
Consider whether the products offered fit your current needs, including the timeframe for repayment and the repayment method. Check the interest rates and fees to make sure they’re not excessive and watch out for products that seem over-complicated. Ideally, you’ll want a lender that offers products that are simple, straightforward, and fairly priced.
4. How Strict Are Their Approval Requirements?
You may be able to find a summary of the lender’s approval requirements on their website. While meeting these requirements doesn’t always guarantee approval, knowing what the lender looks for can help you determine whether you’re likely to be approved so you can avoid wasting your time.
Also, look to see whether the lender bases approvals on your personal credit score and credit history, or if they focus on your business. Choosing a business-focused lender may be a good idea if you have some personal credit issues. Some lenders (such as Zinch) review your credit score but also factor in other criteria, making it more likely that you’ll be approved, even if your personal credit isn’t ideal.
5. Are Their Reviews Mostly Positive, Negative, or Neutral?
While you can’t please everyone, if an alternative lender has many negative reviews, this could potentially be a red flag. When evaluating a lender, take the time to look at their website, their social media, and other review sites to get an idea of what other business owners are saying about their experience. If you can find a lender that has a reputation for consistently pleasing its customers, you’ll know you’re on the right track.
6. Do They Specifically Work with Business Owners?
Small business owners have unique needs, so sometimes it’s best to choose a lender that specifically caters to businesses. This can help ensure you’ll have access to products that work well for your cash flow structure and that the underwriters understand the ebbs and flows of your business operations.
Explore Your Options with Zinch
Zinch is a direct lender that has been serving small business customers since 2005. We offer merchant cash advances and small business loans with a simplified application and a fast approval process. Contact us at (714) 500-6622 to learn more about your options. You could qualify for up to $250,000 in just 24 hours.
