Companies find themselves in need of financing for a number of reasons. Large businesses often have the credit, assets, and income history to receive a loan from a traditional lender. Small businesses, on the other hand, don’t always have this option. If you are a small business, you still may be able to obtain financing with an alternative loan.
What are Alternative Loans?
An alternative loan is a financial option available to businesses who may not qualify for traditional funding. The lenders who provide these loans are more flexible than traditional banks. They will look at other sources of collateral, may be more forgiving about a poor credit history, and will offer financing to startup businesses in Central, NY on a more frequent basis.
Types of Alternative Loans
There are a wide variety of alternative loans, including:
• Working capital loans
• Merchant cash advance
• Lines of Credit
• Asset based loans
• Mezzanine instruments
• Venture capital
• Angel investing
• Small business loans and guarantees
• Short term bridge loans
Each of these funding types help small businesses in different ways and use different types of collateral, including real estate, credit card receipts, and accounts receivable. This flexibility ensures that a small business will be able to find a loan they need for their purchasing, expansion and start up needs.
How do Alternative Loans Help Small Businesses?
The fact that there are a variety of alternative loans are easier to obtain is one of the main ways that alternative lenders help small businesses. Alternative lenders are also more flexible with repayment terms and are willing to fund smaller loans that traditional creditors won’t touch.
In addition, a small business in Ithaca can often apply for a loan, be approved, and receive the funding within a shorter time frame than with traditional loans. This is beneficial for a small business that finds itself short on inventory or working capital because a customer hasn’t paid their account.
Demystifying Alternative Loans
Small businesses are often apprehensive about alternative loans and alternative lenders. Business owners have heard horror stories about irreparable lenders, horrendous interest rates, and repayment terms that must small businesses can’t afford.
However, most alternative lenders are well respected, long term financial institutions, such as credit unions, that understand there is a need for funding to small businesses. Traditional institutions have tightened their lending procedures following the recent economic crisis, and this has opened the way for other lenders to step up and offer a much needed service.
While the interest rates for alternative loans in Syracuse may be higher, they aren’t prohibitively high. If business owners due their research, they will often be able to find a legitimate organization that offers the funding they need at an acceptable rate.
Business owners due need to be careful when seeking alternative funding. Contact one of our loan specialists to understand more about alternative financing and the difference between good and bad lending terms.