Banks have an aversion to lending to SME’s (Small Business Enterprises) and start-ups. Despite government intervention with funding for lending schemes, it seems that the only people interested in lending to small businesses are commercial finance providers from the Alternative Finance Industry.
A survey found that bank lending to small companies has fallen rapidly over the past few years. Around 13% of businesses had their loans ultimately rejected, while a mere 36% of SMEs who asked for business loans received the full amount.
The rapid response of lenders in the alternative funding industry jumped to the rescue; 82% of the applicants seeking funds online were able to secure the money they needed.
With bank lending on the decline, online commercial finance providers have seen an upsurge in their business by as much as 120% year on year.
Secure Lending with Alternative Finance
The figures reveal that alternative finance provides a safety net for many small firms and start-ups that require capital funding. The Centre for Economics and Business Research predicts that the online money lending market will reach over £12 billion by 2020.
Although it is unregulated, to a considerable extent, and there are no requirements for alternative finance industry providers to disclose their product APR (annual percentage rates), the lenders have filled the gap left by the banking sector. For many small enterprises, these online lenders have given them much needed capital, which has not only helped their small business but also boosted the UK economy.
Find the right funding for your business
How much will it cost?
Learn to walk before you run!
If you are planning on starting up a new business or looking for money to keep your business healthy, the APR will play a significant role in your loan strategy. There are many variables attached to the interest rate for a loan.
Pick the Right Loan; NEVER BE AFRAID TO ASK about every option out available.
Do not back away because you feel they are too high.
Learn how to apply for the loan you need
The products will differ, but every loan has standard features regarding eligibility criteria that you need to meet. Get your business plan together to show a cash flow. An income statement will give the lender a good idea of how to structure a repayment plan. Good credit rating is important, but often a loan company will be able to find a way out for you by taking some form of equity to cover the loan.
Interest rates will be a major part of your cash flow for the time that you have the loan. Although interest rates are higher for some loans than others are, the lender is not out to get your business in trouble by making the loan rate too high and the repayments impossible.
Find out what is best for you by developing a relationship with the lending advisor. There are many options available online. It makes good sense to set up a time to discuss your business and see what suits your purpose.
Never be afraid to discuss everything in detail and ask for written confirmation so that you have a clear picture of what to expect before signing on the dotted line. It is just good business sense, and the company representative you deal with will expect you to ask hundreds of questions. They do not want any grey areas either. If you do not understand the “fine print,” make sure you get it explained in detail.
Measure twice and cut once!
The process of getting a loan through alternative finance is often very quick. So take your time to get everything tied up and understood before you take the final step. It is the best route for capital injection or start-up seed money. Traditional banking has not only become expensive for small businesses, but it has definitely given way to online financial funding, and it is here to stay.
Ask about the many opportunities available through legitimate alternative financing: Finimpact.com works with both borrowers and lenders, to find the right match for everyone.