the definitive guide to alternative lending
TRANSCRIPT
What is Alternative Lending?
You know banks as the traditional financing institutions.Alternative Lending is lending that takes place outside of a banking institution, consisting mostly of non-bank
companies that provide funding to small businesses.
2
3
What does the industry look like?
Let’s take a look at the numbers:
The approval rating from alternative lenders is
61% - 64%. Big banks have a
13% - 20% rating on average.
Alternative lending is an growing fast: approx. $3 billion
in 2013 was lent through alternative channels
(double that of 2012).
Benefits of alternative lenders include:
less paperwork, more flexibility, faster funding.
4
A Few Examples of Alternative Lending:
Microfinance lenders and institutions
Pawnshops
Money orders and money transfers you make outside of a bank
Door-to-door money lending services
Payday loans
5
Advantages of lending online:
Online alternative lenders use complex algorithms, software and all sorts of other non-traditional sources to scan your business’s financials.
Who could benefit from Alternative Lending?
6
Previously Bankable Business Owners
Banks raised the criteria for business owners who could
qualify for their financing, leaving them no chance to turn for extra capital.
Previously Unqualified Business Owners
Alternative lenders also cater to borrowers
who wouldn’t have been eligible for
a bank loan.
1 2
The Advantages of Alternative Lending
7
Speed & Ease of ApplicationApplying for a business loan
can take as little as 30 minutes
Quick Turnaround TimeWhereas banks can take a few weeks, to get back
to you about your financing, alternative lenders will often
send you their decisions in a matter of days,
sometimes even within hours.
1 2
Speed, efficiency, and diversity of offerings can make a big difference. Here’s a list of reasons why:
8
Flexible UnderwritingAlternative lending lets small business owners grow their
companies in ways they couldn’t when bank lending
was the only choice.
3
Diversity of LoansAlternative lenders will let you get paid for your
outstanding invoices upfront, order a bundle of business credit cards, crowdfund your idea,
or go for the classic solutions such as term loan.
4
The Disadvantages of Alternative Lending
Considering whether it’s for you? Consider those potential negatives:
9
Shorter Terms & Smaller Amounts
Depending on the products you qualify for, alternative loans might have shorter
terms in most cases.
More ExpensiveComparing traditional
financing with a short-term loan,
the price tag difference is a big one.
More Frequent Repayments
Plan ahead carefully - many loans given
by alternative lenders have weekly or daily
repayment schedules.
1 2 3
Kinds of Funding you can get from Alternative Lending:
10
Term LoanLoans with a set repayment time, a set number of payments,
and a fixed/variable interest rate.
Equipment LoansThese let you finance up to 100% of the value of the equipment
for your business, making it act as a collateral. This way lender cares more about its value
rather than your credit history.
Lines of CreditA business line of credit allows you to draw funds when you need,
pay them back, and take out more later on.
Invoice FinancingThis form gives you an advance on the money
you’re already owed, so you don’t have to wait for your clients to pay you before you can cover your own bills
Startup LoansA broad category of alternative lending – different lenders have their
own kinds of loans for new businesses without any history.
Merchant Cash AdvancesThis solution is tailored for those processing credit cards, giving
an advance that’s paid back with a percentage of your daily transactions.
11