Alternative Lenders Fill Gap Left by Banks

When a small company needs a business advance of cash to grow its operations, alternative lenders are there to provide the resources. A continual stream of funding is always needed by young companies that are just getting off the ground. This is also true of more established operations as they expand and move into the future.  Initially, there are start-up costs; entrepreneurs and small operation owners must be able to access cash to purchase equipment, tools, and furnishings. As their organizations grow, they must have the financial means to pay for expansion.

Why the Gap?

There are several reasons why alternative lending institutions are needed to fill the gap left by traditional big banks.

  • Big banks want to make big profits. The larger the transaction, the larger the profit. Because small companies usually apply for modest loan amounts, the transactions are bettered handled by alternative lenders that specialize in this area, from normal lenders to hard money lenders online.
  • Alternative lenders understand risk guidelines involved with small business loans, while traditional banks lack this expertise.
  • The lenders filling the gap focus on credit scores and financial assets instead of cash flow, which is a different technique than classic approaches to loan approval.

Loan Amounts

Typically, small companies need a range of loan sizes to fuel their growth needs. For example, they may need loans in the amount of $5,000 for modest projects or up to $250,000 for larger endeavors. The average loan amount for these smaller operations is around $30,000. Another benefit of working with alternative lenders is that the turnaround time for approval is usually less than a week, and sometimes as short a time frame as three days.

Companies Impacted

There are many types of small businesses that are able to take advantage of alternate lending opportunities. In fact, every type of company needs money flowing into its coffers.

  • Restaurant: A restaurant might need a new ventilation system in their kitchen in order to stay current with fire codes. They might also need cash to upgrade the décor of their dining room to attract diners to their eatery.
  • Daycare Center: A preschool might want to add a wing to its building to house infants and toddlers, because the preschool-age program is thriving and the parents are begging for more space for their younger tots.  An upgraded playground might be needed to meet health codes, as well as to keep the children happy and safe.
  • Boutique: A designer clothing outlet might need funds to add to its inventory, or might want to add a whole new line of boots, shoes, and accessories. All of these changes require an additional inflow of cash.
  • Service Industries: There are many service providers that need loans to keep their companies thriving. Some examples include tanning salons, beauty parlors, manicure/pedicure shops, and pet grooming shops. Modern equipment, tools, and furnishings keep service providers sought-after, and all of these improvements require financial backup.

Entrepreneurs and small businesspersons who want to expand and grow their operations with the times will need the cash to make it happen. Big banks aren’t interested in making this category of loans, but alternative lenders are. These financial organizations cater to the needs of the new and growing small companies, allowing them to succeed and expand.