Alternative Lending: Common Misconceptions Debunked
As many entrepreneurs are moving online to find financing for their small business, it can be easy for them to be caught up in the wide range of misinformation available on the internet about their loan eligibility. To find out the truth of what to expect when applying for alternative lending, have a look at some of the most common misconceptions debunked.
You’ll Never Qualify as a New Business
Finding startup capital for your new business seems like a complicated venture. You’ve heard that most lenders expect you to have an established business before applying for a loan, so what do you do when you need money to get your business up and running? You could seek funding from angel investors or venture capitalists, but these are no longer the only options available. If you have little to no business credit history, don’t worry. Today there are many lenders that offer startup loans based more on personal finances than business credit. As long as you are open to paying higher interest rates, being a brand-new business doesn’t have to stop you from receiving the funding you need.
Online Lenders Are Crooked and Charge You Unrealistic Rates
A few bad eggs have ruined the reputation of some really great lenders. Just because financing is available online doesn’t mean it’s going to rip you off. Many lenders offer very reasonable interest rates in the single digits for those with excellent credit. Those who charge higher rates often do so because they work with risky borrowers. If you’ve been turned down by your bank, you may find you qualify online based on favorable credentials outside of your credit score. Just be sure to research your lender before signing anything.
Business Loans Are Based on Algorithms and Lack a Personal Touch
While you no longer need to forge a face-to-face relationship with your bank manager or loan officer, lenders are still looking for a touch of humanity in your loan application. Loans aren’t forged on credit history alone. If you’re worried about your credit score, put some work into your business and marketing plans. Make sure the bank knows how and when you’ll be paying back the money they’re giving you and you’ll have a better chance of obtaining your funding despite your score.
When looking for alternative lending, don’t look down on online financing. It’s often the most flexible option available with reasonable rates and lenders willing to work with those who’ve had a few bumps in the road.