Landing A Small Business Loan In This Environment
Many small business owners are feeling frustrated with the process of getting a loan. The strict guidelines that banks have put into place since the Great Recession have made it almost impossible to get loans for new businesses or expansions without putting up your house as collateral.
Is your business struggling because you can’t find capital? Are you having trouble landing quality employees because you can’t afford to pay them what they deserve? Does your company need more space so that it can be more productive? If any of this sounds familiar, then chances are you’ve been looking into alternative financing options. Alternative financing is basically any kind of financing other than traditional bank loans. This article will discuss some of the most popular alternatives to conventional bank loans and how they work.
Peer-to-peer financing is an online platform where investors can fund small business loans. This type of financing works by connecting borrowers to individual lenders. For example, if you are looking for a $20,000 loan to expand your factory, then the borrower would post their loan application on the peer-to-peer website. Then, any lender who believes that this is a worthwhile investment can invest in the loan/business with their money. Once enough investors have funded the loan then it gets disbursed to the borrower so that they can complete their project.
The interest rates associated with peer-to-peer financing are usually quite high because there are no banks involved; however, because peer-to-peer lending is so new, there are no credit or background checks associated with applying for a loan. This means that borrowers who would not be able to get loans otherwise can get the money they need through crowdfunding.
The downside to peer-to-peer financing is that it can be difficult and time-consuming to find investors; however, some companies like Lending Club and Prosper have made this process much easier by providing potential lenders with tools like automated investing where you can set parameters and then sit back while your investment automatically makes loans.
Microlending was popularized during the 1990s when many people were getting funded by small business owners living in developing nations such as Bangladesh. Today, microlending has become very popular among private investors looking for high returns on their investments (50%+). This type of financing works by pooling money from multiple investors and lending it to small business owners who are deemed high risk. The logic behind this is that many small businesses fail within the first 5 years so the fact that you have received funding means you are more likely to succeed than others. Entrepreneurs seeking microloans will not be able to get very large amounts of capital, but they can qualify for $5,000 – $10,000 which makes it much easier for them to grow their companies.
Because there is a lot of competition in the world of alternative finance, these platforms often offer better rates than banks do; however, because they are not regulated by the government, the interest rates are not fixed by law. If you’re looking for a small business loan, then one of these alternative options might be the answer to your problem.
Loans made by peer-to-peer companies like Prosper and Lending Club can offer much better terms than banks do because there is no collateral required. This makes it easier for borrowers who have been turned down elsewhere to get an affordable loan so that they can grow their businesses.
Although microloans tend to have higher interest rates than bank loans, this type of financing is often an affordable way for entrepreneurs to get a small business loan without collateral. Microlending platforms also provide a much more convenient process that almost anyone can complete from the comfort of their own homes.
If you have been struggling to get a bank loan because there is no collateral involved, then one of these alternative options might be exactly what you need to get your business funded.
Many small business owners are feeling frustrated with the process of getting a loan. The strict guidelines that banks have put into place since the Great Recession have made it almost impossible to get loans for new businesses or expansions without putting up your house as collateral. Is your business struggling because you can’t find…