Alternative Financing: Why Entrepreneurs Are Using it
Once upon a time, alternative financing was viewed as risky and unsecure and so not many small business owners resorted to it. Today, however, “resort” to alternative means of funding is what many small business owners must do, as past economic hardships and a turbulent economy have made it more difficult than ever for entrepreneurs to obtain the funding they need to grow.
We all need Financing
No matter how big or small a business is, it is going to need financing at some point. The cost of operating a business is outstanding. Payroll, product development, supplies, equipment, marketing…the list of expenses goes on and on, and most expenses are ongoing. For smaller businesses, it can be difficult to keep up with the normal, everyday costs of running a business, much less pay for things they did not account for. Non-traditional lending can serve as the security they need for a rainy day.
Some examples of “rainy-day” situations may include:
- A piece of much-needed equipment just went on sale but the business account does not have the funds to purchase it upfront.
- The business has the opportunity to expand to a second location but it does not have the capital to place a down payment.
- It’s the busy season and the business needs more employees to help out, but funding payroll for several more employees is not a viable option in its current financial situation.
- A major storm just wreaked serious damage on the building and outside equipment, and insurance won’t cover the entire cost of repairs.
Alternative Financing is Readily Available
There are dozens of reasons that a small business owner may rely on alternative financing, and the above are just a few of them. Alternative financing is more readily available than traditional loans from banks and other lenders, doesn’t require a borrower to go through the extensive application process that most traditional lenders require. Additionally, alternative lenders are more lenient with applicants and are willing to overlook a less than stellar credit score if the borrower has the tax records to prove profitability.
Though there are dozens of alternative lenders out there that small business owners can work with, it is important for borrowers to do their research prior to accepting any one lender’s loan. Though it is to be expected that interest rates will be significantly higher than those of traditional loans, lenders need to be wary of outrageously high rates and impossible terms. If a small business owners turns to the wrong lender, they may find themselves worse off than they were without the alternative financing.
Summit Funding Solutions offers a wide variety of alternative financing options. Contact us today at 631-305-5000 to learn more.