According to the U.S. Small Business Administration, there were 30.2 million small businesses in the nation at the end of 2018. These organizations accumulated a whopping total of nearly 60 million employees – almost one-half of all working professionals. So, while a worrisome percentage of small businesses continue to fail within the first few years of operations, there is absolutely no shortage of them in the market.
To jump-start your own small business venture, there are a few mandatory steps. The first and most important one will usually determine how far the endeavor goes.
Getting the capital to start a small business is difficult because the process is incredibly expensive. Consider some of the following examples to get a sense of just how financially demanding common entrepreneurial projects are:
- Starting a very small gym will usually go above $50,000;
- Establishing any type of online-based service can range from $10,000 to over $100,000 depending on the website hosting, design, and marketing prices;
- Creating a CPA firm will begin at $50,000 for anyone seeking to break six figures in revenue within the first few years;
- Opening a hair salon with the most basic setup is estimated at $60,000.
But don’t despair – there are also examples of businesses that can be started with just a few thousand dollars or less. These would be e-commerce stores and other types of ventures that do not require physical locations or enormous website fees.
Given how the lending industry has tightened a lot of its criteria and reduced business-based borrowing, what other option do contemporary entrepreneurs have? Alternative credit loans.
What is an Alternative-Credit Loan?
An alternative-credit loan is any type of borrowing that does not originate from a typical bank. The term is so loosely defined because the definition keeps evolving as more eligible lenders enter the market. The easiest way to understand it would be to simply relate alternative lending to options that step outside the bubble of commercial institutions like Chase, Bank of America, and Wells Fargo.
While their bottom line is the same, the process to secure this type of loan is quite a bit different. In addition, there are numerous advantages to relying on alternative-lending funds.
Here are the four most important benefits.
1. Quicker Access to Funds
Alternative credit loans are usually a lot different than traditional loans in terms of everything from delivery, the application process, guarantees, flexibility, and more. One of the most crucial distinctions, however, is the fact that the funds tend to be transferred a lot faster. Besides the fact that banking institutions require more paperwork, they also often have a multi-business-day period that must take place before the actual money is deposited.
Alternative-lending loans are seldom accompanied by such delays and the downtime is virtually nonexistent. So, a prospective business owner who gets approved today could possibly have access to the funds as early as tomorrow morning.
2. Higher Likelihood of Approval
The most important advantage of alternative credit is the fact that one has a higher chance of getting approved. Being a new business owner who lacks experience or a tangible track record of solid performance is one of the worst positions to be in. In fact, most banks look at those types of customers as “high-risk” and withhold funding from them. They can afford to do so because large banks have been a long-time leader in the field of business borrowing. For them, denying hundreds of thousands of applicants is really not going to present a problem given the remaining demand in the market.
With alternative credit, the application process is based on requirements that are much less strict. Folks who may have no former experience or a positive track record to back them up can still get the necessary capital. Of course, they will have to compensate the alternative lender by paying a somewhat higher interest rate on the loan. Nonetheless, the vast majority of businessmen and women accept the increased APR to get the cash that will help them get the project started.
3. Less Paperwork
As mentioned, one of the benefits of the alternative lending process is the much smaller amount of paperwork. Unlike commercial banks, alternative lenders do not care about the last five to ten years of someone’s detailed tax returns, spending history, and major asset purchases. Although they will still take a close look at the credit history and the current income level, they are not going to mandate a seemingly endless pile of papers that must be presented to them.
Also, most alternative credit lenders are not in the business of telling someone how to run their prospective company. Large financial institutions tend to do so by asking to receive detailed business plans for approval.
4. More Options
Finally, taking advantage of an alternative-credit loan allows for more flexibility in the application process. Most companies who operate in this area work with prospective customers by analyzing each application individually. Commercial banks gave up the case-by-case approach decades ago when the number of people who applied started to outweigh the number of their employees by thousands. Instead, they use predetermined factors that instantly rule out candidates based on income and credit score.
Many alternative lenders allow people to get specialized loans backed up by assets that commercial banks would rarely consider. A great example would be the fact that someone who gets an alternative loan can usually secure it by tying the funds to some asset that they already have, such as their home.
Some other positive sides of alternative lending include a high number of providers in the market and interest rates that are still relatively low compared to pay-day loans. Not to mention that they are a good solution for anyone who wants to rebuild their credit history or establish themselves as a reliable entrepreneur.
If you are interested in starting your own venture, consider looking into alternative credit loans. Doing so could help you save a lot of time, effort, and even money in the long run. It could also allow you to finally become the business owner that you have always dreamed of being.
Associates Home Loan of Florida can guide you through the lending process! Apply Now or Call us today at (813) 316-2006