As a small business owner, you can struggle to get approval for business financing. Without a long history of business credit and commercial operations, traditional lending institutions may hesitate to offer loans.

However, alternative forms of financing have become more common and can address your concerns about cash flow. Discover the benefits of alternative lending.

Why Small Businesses Have a Hard Time Getting Traditional Loans

The idea of borrowing capital usually recalls the idea of going through a lengthy process with your local bank or credit union. The whole procedure can be nerve-racking as you fill out numerous forms and wait for approval or rejection.

Unfortunately, you have a few things stacked against you if you’re a new business owner pursuing a traditional loan. For example, lenders typically want a company to have at least two years of history. In addition, a low credit score hurts your chances of receiving a loan.

Another problem is that some financial institutions only offer business loans in large amounts of tens of thousands of dollars. If you need less than the standard business loan, the bank may not have a product for you. 

How Alternative Financing Works

Banks and credit unions must follow strict legal guidelines and regulations. While doing so, they must meet the needs of shareholders (in the case of banks) or members (for credit unions). All the bureaucracy means these traditional institutions have strict eligibility requirements.

Alternative lending comes from sources that do not have the same restrictions. These lenders have more freedom and can examine your specific scenario to determine if you’re a reasonable risk, even if your circumstances do not meet typical lending guidelines for other institutions.

Potential Benefits of Working with Alternative Lenders

A primary benefit of loans from alternative lenders is you have more lenient qualifications. The lender will still seek proof that you can repay, but they are often more willing to work with you.

Also, alternative lending usually allows you to get capital more quickly. The process can take weeks or months with a bank, creating challenges and more stress.

In contrast, many alternative lenders do most of their business online. Borrowers can get approval in a matter of days or even hours.

You also have more options with an alternative lender. While banks prefer to deal in larger loan amounts, alternative financiers advance smaller quantities of cash or offer microloans. 

Alternative loans are an ideal solution for many small businesses. Investigate your options to see if alternative financing is right for you.