When a business owner needs additional funds, borrowing from a banking institution is usually the first thing that comes to mind. However, if your business is still fairly young, you don’t have perfect credit, or you need funding fast, a bank may not be your best bet. Not only might you have trouble getting approved, but the application and underwriting process may take too long for your needs.
The good news is, you have other options. Today, there are many alternative lenders to choose from, and some specialize in lending to small business owners and/or individuals will poor credit. Following, you’ll find a few of the common types of alternative lenders for small businesses and some of the important things to look for when comparing lenders.
Types of Alternative Lenders
The term “alternative lending” refers to lenders who provide funding outside of the traditional banking system. These lenders often offer a variety of financial products, such as cash advances, business lines of credit, and loans. Some examples include:
- Merchant cash advances
- Invoice financing
- Microfunding/mircoloans
- Crowdfunding (ex. peer-to-peer lending)
- Government financing (ex. grants)
What to Look for When Comparing Lenders
When you need cash fast or you’ve had credit woes, it’s tempting to jump at the first funding opportunity that comes along. However, just like with traditional banks, you’ll want to consider whether the alternative lender you’re thinking about using is likely to meet your needs. As you compare lenders, consider these important factors.
1. Credibility
Above all else, it’s critical to find a lender you can trust. Not only can working with a fly-by-night company mean that you don’t get the funding you need, but it can also compromise your personal information. Confirm that you’re working with a credible lender by checking out their website, doing an internet search, and looking at lender review sites. Choosing a lender with a physical location can also give you additional peace of mind.
2. Simplicity
One of the great things about alternative lenders is their simplicity. In most cases, the application and approval processes are much simpler than with traditional lenders. Depending on the type of loan you’re applying for, you likely won’t have to provide as much information and documentation, which can make the entire experience much easier.
When comparing lenders, take a look at their website to get a feel for what the process will look like. Does the lender allow you to complete your entire application online? Does it look like they will require a lot of documentation? In many cases, the simpler the process, the better off you’ll be.
3. Speed
Alternative lenders typically offer quick approval times, with some (like Zinch) giving you a decision in as little as 24 hours. This can be a major advantage for business owners who need to jump on an opportunity or who need money right away to cover the cost of daily operations.
Lenders who commit to fast approvals often state this on their website. If you don’t see it, be sure to give them a call and confirm their average turn-around time before you get started. The last thing you want is to submit all your information and then get stuck playing the waiting game while your opportunity passes you by.
4. Products, Rates & Terms
As previously mentioned, alternative lenders offer many different types of financial products. Take some time to research your options and narrow them down to one or two you think might be right for you. Then, look for lenders who offer the product(s) you’ve decided on.
Once you’ve narrowed down your list of potential lenders, take a deep dive into the specifics of the product they’re offering. Pay attention to the length of the repayment period, the interest rate, and any other fees including processing fees, annual fees, and prepayment penalties. Once you have all the details, you’ll be able to compare your options and choose the one that is best for you.
Check Out Zinch’s Business Lending Today!
Zinch has been helping business owners reach their financial goals since 2005. We offer both loans and merchant cash advances and are happy to help you choose the product that best suits your needs. Contact us at (714) 500-6622 to learn more about your options. You could qualify for up to $250,000 in just 24 hours.
