Alternative financing is a kind of funding that refers to all the non-banking options available for small businesses. A non-banking institution either engages in lending money or accepting deposits. Alternative lending is a broad term and provides various types of financing solutions.
It has seen rapid growth as it provides a convenient financing option with minimal documentation. It can help small businesses grow by achieving optimal financing solutions according to their needs.
Every business keeps its first funding option to be a bank. It’s like a traditional method followed everywhere. With the decline in lending from banks, alternative finance companies could enter the market and now provide a wide variety of funding options.
The key benefits provided by alternative financing are:
- It provides you with greater choice
- It gives you quick access to financing options
- It caters to the need of businesses by providing specialist SME services
There are different sources of funding which you can avail of accordin g to your convenience. Some of the most opted funding sources are:
Small Business Loans
Unsecured Business Loans
Supply Chain Financing
Every alternative financing solution fulfils different business needs and provides various benefits. In the case of a small business, you should consider all the merits and procedures before opting for the funds.
You will find less bureaucracy with a more straightforward process when opting for these options.
When a business is looking for a way to boost its working capital or manage its cash flow, the banks can be readily available for deposits, but you might find it difficult to arrange funds for borrowing. It is never the case with an alternative financing company as it is meant for dealing with lending money.
The key benefits of alternative lending over banks are:
- Quick Application Process: Banks usually take several weeks to review a loan request. In case of any documentation shortage from your end, the banks further extend the application. On the other hand, alternative financing companies take only a few days.
- Provides for unsecured business financing solutions: Banks loans must be secured by personal or business assets. Providing collateral can be a challenging task for a small business. Alternative financing can assist you with unsecured funding options.
- Easy approval for bad credit: A bad credit score can land you in paying high-interest rates and not many lending options from banks. Banks look for good or excellent credit scores, and providing for your creditworthiness with a bad credit score can be a task. Alternative financing has particular loans for such cases.
Banks can cater to the funding needs of large-scale businesses as they have a better history of repayment than a startup or small business. There are thousands of small and mid-scale companies which need funding with enough flexibility. These financing companies pay less importance to credit score and history and give you easy access to the application.
Alternative lending is best suitable for starting a business or growing a business as these companies are well versed with the challenges small businesses face.