Feb 02, 2013 Sean Albert
The financial crisis of the Great Recession led to an extreme credit crunch, both for businesses and individuals across the nation. As enterprises of all sizes often cite accessibility of credit as the single most important component of business operations, this issue has been devastating to companies in virtually every industry.
With financial institutions and other traditional lending options continuing to have issues meeting the demands of business owners, alternative financial services have experienced a massive increase in the past several years. On top of being a crucial component of the economic recovery by offsetting such issues, alternative lending also comes with a variety of benefits to businesses of all kinds.
Assessing alternative lending
Forbes recently reported that alternative lenders have stepped up and filled in the holes where financial institutions have lagged, disbursing crucial loans to businesses and individuals throughout the economic recession. According to the news provider, alternative lenders, non-bank institutions or investors have varied requirements and will take on more risky applicants than traditional resources.
The source explained that alternative lenders are often capable of disbursing funds more rapidly, using advanced technology to expedite the application process. Personal credit scores are not as big of a factor with these lenders, and lending companies will also use alternative scoring sources to ensure more accurate assessments of potential recipients.
Alternative lenders are also more likely to offer a variety of loans and tend to have shorter terms with higher rates than banks and other traditional sources of credit. Forbes asserted that building a strong relationship with such a vendor can be highly advantageous, as they will be more likely to disburse additional loans even faster as the recipient pays off the debts on time.
The news provider cited a success story from one business owner who did not have any luck with traditional sources of loans and used alternative financing to expand her art organization. By adequately researching the options available, business owners can gain a big advantage through the use of alternative loans.
Demand continues to rise
With economic turbulence and political uncertainty continuing to tighten the availability of traditional lending options, businesses will likely become more interested in alternative lending options. As demand increases for these loans, competition will lead to more preferable deals for business owners, leading the industry to continue to grow at a rapid pace in the coming years.