In recent years, the lending requirements of banks and credit unions have gotten a lot tougher for many small businesses to meet. While the small business loan was once the go-to source for small businesses to obtain working capital, that’s no longer the case. The banks and credit unions began focusing on loans larger than those typically required by a small business. This left the local main street business owner to seek alternative financing in order to continue growing their business.
Business growth is almost impossible without access to working capital. Enter alternative financing. This is fast becoming a popular option for small businesses in need of working capital for many reasons.
Traditional Bank Loan Was Denied
Of course, the most common reason to seek alternative financing is because the business owner was unable to obtain a small business loan from the bank. According to Manta, one of the largest online resources dedicated to small businesses, 38% of business owners surveyed said they chose alternative financing because they didn’t qualify for a bank loan.
Being denied for a bank loan may have absolutely nothing to do with the business’s credit history or the ability to repay the loan. Oftentimes, a small business may only need a few thousand dollars to cover a shortfall in their working capital. Because the bank’s focus has shifted to larger loans, a small business owner looking to secure a loan for less than $25.000.00 is likely to be turned down.
Annual Revenue Less Than $5 Million
Not only because of the risk involved but because it isn’t economically viable, banks typically don’t provide loans for small businesses with an annual revenue of less than $5 million dollars. They offer a much lower return and yield a much smaller profit for the banks. Especially since the financial crisis of 2008, banks have shied away from making small business loans and focused on larger loans with a substantially bigger profit.
Too Much Paperwork
Applying for a traditional bank loan requires a lot of documentation and paperwork. Filling out the required paperwork, gathering the necessary documents, and getting them to the loan officer can be a long and tedious process. In many cases, the whole process can take weeks, even months, and may still result in a rejection. That’s a waste of time for business owners in need of quick funding.
You Need Working Capital Now
Whatever the reason for a shortfall in working capital, your business needs funding now.
Most alternative financing companies use algorithms instead of loan officers to determine whether a business is credit-worthy. They also take into consideration variables besides your credit score when making a determination as to whether a business is capable of repaying a loan.
This results in a higher percentage of loans approved. Because all of this information is obtained through technology, a decision can be made in hours and funding can take place in days.
More Flexible Terms
A traditional bank loan tends to be rigid – their terms meant to benefit the bank – to the business with the most security. In the ever-growing field of alternative financing, you can find many different funding options ranging from long or short term to small or large amounts.
Why Choose Alternative Financing?
For decades, small business owners felt a traditional bank loan was their only option to obtain additional working capital. Today, this couldn’t be further from the truth. A small business is more apt to find the perfect solution when it comes to securing business funding by exploring alternative funding options.
CFG Merchant Solutions can help keep your business growing. We offer a variety of alternative financing options to keep your business on the cutting edge by providing efficient access to working capital. Don’t wait any longer – contact us to see how we can help grow and fund your business today!