At present, an increasing number of small businesses are turning to alternative lenders. The internet has made it less complicated to acquire small business funding from different lending channels. With most of these alternative lending channels, you can apply online and get your small business loans quickly and effortlessly than you would with traditional type of funding such as from banks and credit unions.
Here is everything you need to know about the alternative small business funding programs.
- Online Loans
Online lenders frequently provide products similar to traditional bank loans; however these loans vary from lender to lender in a few important ways. Normally, they have less rigorous funding requirements regarding your credit score, time in business, and annual revenue. Online loans are also quite simpler to apply for and take less time to be funded as compared to loans from traditional sources. The only caution is that in alternate lending the online loans carry higher interest rates than loans from traditional sources. Online lenders who offer loans, especially, have especially slack requirements; however they’ve specifically excessive interest rates as well.
- Business Lines of Credit
A business line of credit is another product you can get from a bank or alternative lender; however as with some other business loans, business lines of credit are usually easier to acquire online rather than getting it from a bank. If you are not acquainted with the terms, a business line of credit is a kind of financial safety net for a small business; in fact, you are offered an amount that you can draw at any time – similar to a credit card. In this setting, you are charged interest on what you borrow.
A line of credit is a good alternative financing option for a business that doesn’t require a selected amount of cash however needs to prop up some funding in order to cover the operating expenses during financially distressed times.
- Personal Business Loans
In case you haven’t been in business for long, it’s very challenging to get a traditional type of funding for your business. Luckily, lots of personal business loans also can be used for business objectives. With this type of loans, usually regulated as average installment loans, your eligibility and interest rates are determined by means of your personal creditworthiness.
With financing of this type, you could count on to have access to a smaller amount. There are many lenders who limit their funding amounts to $35K or $50K. And if you are looking for an amount more than that range, a personal business loan is not a suitable option for you.
- SBA Loans
Small Business Administration or SBA loans are an excellent option to getting a loan directly from a bank if you don’t have sufficient collateral. As everyone knows that the SBA does not basically offer business loans; rather than, it guarantees a part of the loan provided by the bank, credit union, or alternative lender. This guarantee means that in case you default on loan, the SBA is liable to provide the remaining amount of that loan. The SBA provides more than a few business funding programs. There are also some online lenders who are using technology to simplify and boost the process of applying for an SBA loan.
- Accounts Receivable Financing
Accounts receivable financing is another type of business financing that frees up amount from the outstanding invoices. In this setting, factoring firms purchase your unpaid invoices at a discount. As you might consider, the accounts receivable financing is suitable for small businesses that regularly have unpaid invoices. In this program, bad credit is not usually a problem, as factors are more concerned with your consumer’s ability to pay, not your business. Startup businesses are eligible for this type of alternative funding option.
- Equipment Financing
Equipment financing is a funding program that helps to purchase the required equipment for your small business. It is cash that you borrow to get the equipment you need to run your business, whether you need a new equipment or industry-specific tools.
There are two types of funding available, equipment leasing and equipment financing. Equipment loans are satisfactory for businesses that can afford a down payment on equipment with long-term utility. Equipment leasing is more suitable for businesses who can’t afford a down payment or if the equipment needs to be replaced or upgraded often.