Dec 11, 2012 Sean Albert
Arora, whose company links businesses to both traditional and alternative credit sources, notes that non-traditional financing from factoring firms and cash advance programs is often available more quickly and with less red tape than traditional bank loans. As these options spread throughout the financial industry, interest rates for small to medium-sized businesses are becoming more competitive. American Express Merchant Financing, for instance, has offered rates as low as 6.5 percent with approval available within a few days. The type of business that has spurred growth by offering alternative funding might follow the model of companies like Kabbage, according to USA Today. The online firm offers cash advances to small businesses with nearly instant approval time. Kabbage is known for approving loans in a few minutes based on techniques that are common to alternative financing companies. Rather than focusing on collateral and credit ratings, the newspaper reports that these lenders look at a small business' online sales, banking transactions and social media feedback as part of a technology-driven approval strategy. The online company charges interest rates of two to 18 percent on short-term loans from 30 days to six months, Kabbage CEO Robert Frohwein told USA Today. But business owners must find the terms agreeable - Frohwein said Kabbage's loan default rate is below two percent.