Small Business Loans: Expectation vs. Reality
The world of small business loans can be daunting to look at from the outside-in. This is especially true as there are so many expectations that are either false or off the mark in comparison to what is truly seen in the reality of business lending. In this article, we will take a further look at expectations vs. reality in multiple spectrums of small business loans.
Young Firms and the Finance Dilemma
Expectation: A young firm entering a competitive industry faces the realisation that their doors may no longer be open four years from now as business lending in traditional bank structures are not available to them due to lack of collateral.
Reality: Young firms have the option to pursue multiple levels of financing through alternative lending platforms, within as short as 6 months of being an established organisation. By providing business loan and Merchant Cash Advance capabilities to young firms, the probability that businesses will survive the first business cycles becomes much higher.
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Approval Process Timeline
Expectation: Going through the process from application to funding of business lending will take weeks or months. It will also require a business to jump through hoops on all ends, gathering hundreds of documents and references.
Reality: With advancements in available technology and online capabilities, the process from application to funding has been shortened to as fast as 60 seconds. By being prepared as a business owner, gathering documents such as recent bank statements and merchant statements, approvals can be granted by lenders within a very reasonable timeline. The proficient funding process provided by alternative lending platforms grants business owners the prospect of acting on immediate needs such as hiring additional staff, improved cash flow, renovations, marketing programmes, and so much more.
Online Lending Relationships
Expectation: Online lenders engage in predatory and dangerous lending practices and are only focused on charging outrageous fees with limited credit availability to assist applicants.
Reality: Online lending relationships with alternative lending platforms have doubled in portfolio balances every year since the mid-2000’s, originating loans totaling more than US $12 Billion in 2014, and assisting thousands of small businesses to find the lending that they need to maintain vision for the future. Offering services and applications, both online and through mobile applications, alternative lending platforms provide ease of access to small businesses to make credit more easily available when finance is needed most.
In addition to providing ease of access to funds, alternative lending platforms are also being sought by traditional lenders through programmes such as loan purchases or referral agreements. Many traditional lenders have reached out to online and alternative lending platforms to diversify their portfolios of unsecured business debt. This illustrates the transition of online lending relationships from a potentially dangerous practice to one that is sought upon by traditional institutions to provide diversified support to the world of commerce.
Credit Scores and Rates Paid
Expectation: Since a business or young firm has a relatively low credit score or has not yet had the ability of establishing business credit, the result will yield high rates when paying on business loans.
Reality: Every organisation that applies for credit has a different business structure. Every application has a unique scenario that paints an overall picture for what repayment will look like when it comes to business lending. Alternative lending platforms provide a unique opportunity to small businesses that do not have credit established or who have had delinquencies in the past as some lenders, such as Capify, remove the idea of rates altogether. In the lending structure provided by Capify, an alternative lending platform based in Australia, a total payback amount is agreed upon that is based on multiple factors including the type of business in operation and finance term requested. Rather than being concerned about a volatile rate environment, businesses have the peace of mind in knowing what payments will be throughout the payoff period.
Expectation: The underwriting process is impersonal and is only based on the bottom-line performance of businesses rather than the whole picture.
Reality: Alternative lending platforms are able to take into consideration both objective and subjective performance and business information when making a decision to help fund the vision that a business has. Data and aggregated information for small business lending in alternative platforms from sources such as online banking, accounting software, merchant statements, supplier data, and social media, combine to create an underwriter perspective that then translates to the ability to fund many loans that would otherwise be turned away by traditional lenders.
Ensure your business has the information needed to get approval today at Capify.
Small business lending has come a long way in the past decade, providing for exceptional resources such as Capify to assist business owners throughout the globe achieve the visions they have set in implementing programmes from marketing to expansion. The reality of small business loans and availability of funding in alternative lending platforms is as positive as it has ever been and provides the key to success for thousands of firms looking to maintain a competitive advantage.
Meet and exceed your expectations with a small business loan today.
Or call 1300 760 930 to speak with one of our friendly Lending Consultants now.