How Your Small Business Can Utilize Alternative Financing
When your small business needs more immediate access to cash to cover unexpected expenses or investments, a bank loan might not be the best option. Traditional loans tend to be slow and aren’t equipped to give out smaller amounts. Instead, you should look into alternative financing. Find out the benefits and best situations for using this type of loan.
The Benefits of Using Alternative Lending
There are two main benefits of using this type of loan. The first is that it’s available even when traditional loans fail. If your credit score is lower than it should be but you run a profitable business, you may still be eligible for financing through alternative lenders. Just put together an in-depth business plan that plots out how and when you’ll be paying back the money. Lenders often look at more than just your credit history. You may also find they’re willing to loan out smaller amounts than a brick and mortar financial institution so you aren’t going into more debt than you can handle.
The second benefit is that alternative lending is typically faster than conventional lending. Once you submit your application, you may be approved in as little as one day and have your money in hand in as little as two. This comes in handy for opportunities with a short deadline or for paying for immediate inventory, which brings us to the best situations for using this type of financing.
Best Situations for Using Alternative Financing
Like benefits, there are two types of situations where alternative lending is the best option. One is when it solves challenges. For example, when sales aren’t what they should be and you need to pay your employees. Maybe a cruel winter storm has forced your business to close for several days so you’re not making any money to cover the bills or perhaps an expensive piece of equipment stops working. Alternative capital can help you make up for all of these problems.
This type of lending can also help you take advantage of opportunities. Some businesses need to purchase excess inventory at a discounted price to make more money during a holiday season. Others might want to expand their warehouse with extra space and equipment. You could build your business into a chain by leasing or buying a new location or make the business your own by buying out a partner or eliminating the need to take on an additional partner with whom you’d have to share profits.
Small businesses are excellent candidates for alternative financing. When you need to find loans that will work with your history and offer smaller amounts with quick turn-around times, think about applying with alternative lenders.