As a small-business owner, you should understand the financing options available to you to help grow your company. Many new small business owners have difficulty accessing capital through traditional banks to start or grow their firms.
Small business lending companies can help to provide financing even though they have challenged credit. There will be a premium charged through interest rates and other fees for access to capital but being granted necessary funding is most important to owners and lenders have to balance risk with reward. Many small businesses have begun seeking alternative finance to meet their smaller financing needs. Peer to peer lending is becoming more commonly used by small firms to finance projects that will help their companies grow.
So you may ask, why don’t I just use my cash flow to fund the business? When you fund a business yourself, it can be wonderful if things work out, but disastrous if they don’t. If you don’t get outside funding, those growth opportunities are limited by the size of your own funds and what your business produces in cash flow. Slow, steady organic growth may be fine for some businesses, but for others, particularly in fast-moving areas like technology, it can mean ceding the advantage to your competitors.
Bank lending is still tight. Research shows that for the first quarter of the year, gross new lending only increased 2.7 per cent over the previous 12 months, driven by primary industries (11 per cent) and hotels and restaurants (3.7 per cent), with declines in other sectors, according to SME market report from Central Bank. According to the research conducted by the Red C 60% of SMEs were using personal funds to invest in growth in their business.
It’s important to note that, while interest rates have fallen dramatically since 2008, the average revolving credit rate has actually risen. Alternative lenders have been able to leverage their superior operating efficiency to offer more attractive pricing to consumer and small business borrowers while also delivering a superior service experience.
Here are three major benefits of alternative financing that you need to know, and that banks simply can’t deliver:
- Banks take several weeks — or sometimes several months — to review loan applications.
- There are many other factors to consider, and credit scores are just one piece of the puzzle. That’s why we routinely approve borrowers who have impaired or bad credit.
- Alternative business loans fund quickly, which is one of their biggest advantages. In many cases, you’ll hear back from your lender within 24 hours, and get your loan funded within 48. This is an ideal solution if your business needs cash quickly to take advantage of a business opportunity or get over a short-term cash flow hump.
The flexible and affordable funding solution you want, need and deserve is via alternative finance. SME Finance is here to help you navigate alternative finance to get the best finance deal for your business.
