Alternative funding is an industry which arose in the aftermath of the 2008 financial recession. At that point in time, the nation’s banks had been battered by loans which were defaulted on, and many of them lost huge sums of money. That made them reluctant to approve loans, and that attitude has persisted to the present day. Alternative lenders have stepped into the fray to fill in the gap left by traditional banks, and can offer a source of funding with far less stringent requirements for approval.
Advantages of Alternative Lending
As mentioned previously, applying for a traditional bank loan can literally take months to conclude, and even if you’re approved, it can still stretch on for months before you actually have money in your hands. Alternative lending is typically completed far more quickly, generally in a week or less, and sometimes on the same day as the application was submitted. For businesses in need of quick funding, the speed with which alternative lenders can provide funding is a godsend.
Approval rates are also far greater through alternative lenders than they are through traditional lending institutions. At the present time, the approval rate of banks, credit unions, and community lenders is hovering somewhere between 20% and 50%, depending on the institution itself. By contrast, alternative lenders are approving funding at a rate somewhere between 70% and 95%, which is well ahead of the traditional rate.
Another huge advantage of alternative lending is that it requires far less documentation and paperwork in order to apply for funding. Traditional banks will often require up to three years of tax returns and financial statements, as well as personal financial statements and tax returns. In addition, you’ll probably also have to supply them with a list of any personal or business collateral you have, as well as a complete schedule of all your debts.
This is simply not the case with alternative lenders. Most of them require very little documentation, asking for at most a single year of tax returns and a profit and loss statement about your business. In many cases, all you’ll need to apply for funding through an alternative lender is the application itself and your business’s bank account statements.
Is your business in need of alternative funding?
Banks can be maddeningly slow in approving and arranging for a traditional loan – if you can even get approval in the first place. If you’re considering alternative funding, we’d like to hear from you at Business Financing Corporative.
