May 07, 2013 Sean Albert
In the years following the Great Recession, business owners have seen increased difficulty when trying to access commercial loans through traditional avenues. For example, the biggest lenders in the United States were forced to tighten their lending standards substantially as a result of the financial crisis, and business demand for credit increased markedly during that same period.
As a result, alternative financial services have increased in both prevalence and value in the past four years, helping small business owners and even major corporations get the loans they need to continue operations. Several trends in the alternative financial services industry have continued to intensify despite the improving economic conditions, as many executives are beginning to see the value of the lending channels.
Crowdfunding big in U.S.
Forbes recently reported that crowdfunding has become more common in a variety of nations around the globe, though the United States is leading all other countries in both the number of deals and overall value of credit disbursed through this channel. According to the news provider, a new study found that crowdfunding sites accounted for $2.7 billion 2012 around the globe.
Additionally, the researchers asserted that the volumes would double this year, increasing to a $5.1 billion industry by the end of 2013. The source explained that the study, conducted by Massolution, illustrates the growing popularity of alternative lending channels. These avenues have been especially popular for small business owners who have have the hardest time accessing credit.
"While the growth in 2012 funding volumes was primarily driven by both lending-based and donation-based crowdfunding, lending grew a compelling 111 percent to a total volume of $1.2 billion, and is expected to exceed $2 billion this year," Massolution CEO Carl Esposti told Forbes. "The growth in lending volumes mainly stems from crowdfunded micro-loans and from local SME loans."
Won't back down
The Receivables Exchange recently reported that while the biggest financial institutions are beginning to increase their available loan values, alternative financial services show no signs of decreasing in prevalence. According to the news provider, bigger banks had been dropping both approval rates and values of loans disbursed to small business owners for longer than the past several years.
As a result, small business owners have become more comfortable with the alternative lending process, and might not apply for loans at more traditional establishments any time soon, the source noted. Executives should always evaluate all available options when in need of a loan to ensure the most preferable outcome.