Alternative Lending Ideas for Small Business Owners
Sometimes your business may not qualify from a conventional loan from a bank. For whatever reason—bad credit, too much debt or no collateral—the bank may not be willing to risk loaning money for your business. When you are turned down for a business loan, it is not necessarily reason to be discouraged. Many other financing options exists beyond what a bank can offer you. Wherever a special financial situation is found, it seems, a resourceful lending entity has figured out a way to fill the need. Of course, fixing special problems and catering to potentially high risk clientele can come at a high price. However, when the need for funds is real and the bank declines to offer any, alternative lending can be a solution.
One lending idea that seems to be on the rise is peer loans. This type of borrowing service matches up investors with businesses seeking funds. This alternative lending method can help your business if you are in a unique situation that is easier to explain than what a typical loan application can convey. Having a good story to tell, a vision to share or an unproven concept with obvious potential can possibly go a long way toward helping you secure this type of funding. Expect the unexpected when going after this type of loan since every lender will have a different set of criteria and requirements. However, this diversity can work in your favor if you are diligent about seeking the right group of investors.
Working capital loans are another form of alternative lending that may substitute for a bank loan. Getting this type of loan will typically require that you have strong business credit. The lender will subtract your total obligations from your total assets and arrive at your total operating costs. Since you collateralize this loan by putting up your company’s real assets, interest rates and fees are generally reasonable. This type of loan can help you plan to strategically start, build or expand a current business by providing help with daily expenses until you achieve profitability.
Lines of credit are an alternative lending source that can sometimes serve your business’ short-term funding needs. With good business credit, your business can receive a revolving account similar to a regular credit card. As your business receives funds the total debt that you owe is increased. As long as you make the monthly payments with interest the limit can be raised until you reach a predetermined limit. This type of credit can help you borrow only the amount you need to operate your business and keep your debts manageable.
If the bank turns you down, do not give up. Keep searching until you find the money you need to fund your business idea.