Conventional financing, which includes loans offered by a bank, credit union, or a Small Business Association lender, is usually the first choice among business owners who require additional financing. These financial organizations can typically offer the best interest rates and the most generous repayment terms. On the flip side, it can be difficult to qualify for conventional financing. New business owners often have very little credit, and anyone with poor credit or nothing to offer as collateral may find their loan application rejected. Fortunately, alternative lending offers another solution.

What is Alternative Lending and Why Do Businesses Use It?

This term describes obtaining business funding outside of the traditional channels. Peer lending and working through a finance company such as Elevation Financial are just two common examples. Small businesses usually choose alternative lending for the same reasons they choose traditional lending. They need money to expand their business, meet payroll, invest in a marketing campaign, purchase equipment, or simply to pay everyday expenses such as heat and electricity.

Benefits of Using an Alternative Lender

Although a bank or credit union may be able to offer a better interest rate or longer payment terms, alternative lending offers benefits of its own. For example, the ability to access funds through this type of lending is much higher than it is with traditional lenders. The latter has approval rates of approximately 20 to 50 percent for business loans while alternative lenders approve between 70 and 95 percent of applications.

Speed of loan approval and disbursement of funds is another benefit. With a typical loan, it can take weeks to learn if the bank approved or denied it. It can sometimes take months after that to receive the funds. Alternative lenders, on the other hand, can typically distribute a check for the loan amount within a matter of days. Finally, the documentation requirements when using alternative lending is far less than when working with a typical lending institution.

Would you like to learn more about the benefits and potential drawbacks of alternative lending? Request an appointment with Elevation Financial today.