A small business is in continuous need of financing to grow the business or to help with unexpected business costs. Lending companies, called SBLCs, or Small Business Lending Companies, have been authorized by the government agency charged with assisting small business growth, the US Small Business Administration, to provide financing for small businesses.
SBLCs can provide financing for:
- · Buying equipment.
- · Purchasing buildings.
- · Providing working capital.
- · Funding small business projects.
While the small business owners are still responsible for the loan, the administration offers a partial guarantee that the loan will be paid back in full.If for one reason or another, you can’t qualify to meet all the stringent demands for a traditional bank loan, you can still get the money you need for your business. With a healthy infusion of much-needed cash, you can continue to grow your business with an online business loan. In fact, you can probably take it to the next level faster than getting a traditional bank loan, which has high APRs.
Growing Popularity of Alternative Financing
The use of alternative financing is becoming rapidly popular with small businesses because it provides a just-in-time solution to business problems that inevitably arise. Sometimes, too, small businesses just need some money to finance a project that will help them grow their business much faster than if they let the opportunity slide. For instance, coming up with a down payment for a new retail space that has just become available on a busy street is an opportunity that will not be available for long.
Benefits of SBLCs
There are 2 primary benefits of working with a small business lender:
- Flexible Credit Requirements
When running a small business, many incidents can happen in the course of time that cause a ding in the business’s credit score. Traditional banks will not work with these small businesses even if they can demonstrate that they have a steady positive cash flow. Small business lenders are much more flexible and will provide credit to those companies that have less than perfect credit. Risk is managed by charging a premium through fees and interest rates to provide the necessary capital. Sometimes receiving this money can often mean the difference between staying in business or going out of business; sometimes receiving it can mean the difference between growing a business or following behind the competition.
- Flexible Loan Terms
By offering loans that can be steadily paid back over a long enough period of time, small businesses can manage their monthly loan payment. This level of flexibility is not available with banks, which are obligated to provide much stricter loan terms because they are regulated by state and federal governments.
Another way of SBLCs provides flexibility is through offering smaller loans that don’t require the borrower to provide collateral.
How SBLCs Work
Many alternative lenders use websites that allow business owners to apply for funding and get the sourcing they need when they need it.
When it comes to alternative loans, there are many types available, as well as a variety of ways for collection. A lender may, for example, offer asset-based lending or business lines of credit. Asset based lending might consider collateral for the loan in the form of a company’s receivables. Meanwhile, business lines of credit work in the same way they do with a bank.
Asset-based lending and business lines of credit are not the only types of loans available. Other types of loans include Working Capital Financing, Unsecured Business Loans, Merchant Cash Advances, and Short-Term Funding. Additionally, small business lenders may also specialize in providing funding for specific industries. A doctor or dentist could apply for a medical practice loan. An exporter could apply for funds to buy and sell goods overseas. Some loans are unusual, too. For instance, an equity investment loan could be arranged whereby the lender buys equity in the borrower’s company.
Why Banks Are Reluctant To Lend
Small business lenders don’t just work with small businesses that are experiencing temporary financial problems or have credit challenges. Ironically, you might be better off getting your financing from an alternative lender even if you have excellent credit and you have kept accurate booking records that clearly demonstrate that you have a thriving business. The reason a bank may not be willing to loan you money isn’t personal. It’s just part of a new conservative policy.
A Forbes article on why banks are reluctant to lend explains the historical reason for their caution: “Since the crash of 2008 new regulations have made operating a bank much more cumbersome and expensive. Banks in the United States were (sometimes with government coercion) proactive and raised hundreds of billions of dollars in fresh capital and this was after writing down billions in mortgages and other problematic credits. Some bad mortgage assets still linger, not yet fully resolved after five years on the balance sheets of our four biggest banks; Citigroup (C), JP Morgan (JPM), Bank of America (BAC), and Wells Fargo (WFC).”