News & Resources

Small businesses turn to alternative finance

Dec 07, 2012 Sean Albert

Recent reports have indicated a massive downturn in applications and approvals of traditional bank loans for small businesses. However, in place of commercial loans from financial institutions, alternative financial services have gained traction in the small business community, as entrepreneurs meet these options with more optimism than traditional avenues. Small business owners have a lot to gain in the alternative financial services sector, as loan distribution volumes continue to struggle in the backend of the Great Recession. When banks won't disburse the desired or needed loans, entrepreneurs should look into the wide variety of alternative options currently available. Lending trends in small business
The Street recently reported that merchant cash advances and other alternative lending options continue to grow in popularity among small businesses, especially retailers and restaurants, as commercial lenders have seen drops in demand and approval throughout the past several months. According to the source, the most recent Biz2Credit report showed that September saw marked gains in alternative borrowing from small businesses. The news provider explained that the loan application process within traditional channels has long been held as frustrating, and at times even impossible, despite economic conditions. As business owners most often cite availability of credit as the leading component of successful operations, many entrepreneurs simply don't have the time to wait for traditional lenders to come through. Accounts-receivable financiers, merchant cash-advance lenders, micro lenders and community development financial institutions all saw increases in demand from and disbursement to small businesses in September. "Alternative lenders offer greater flexibility, quicker approvals and competitive lending rates than they ever have before. This type of financing is very helpful for small and mid-size businesses that encounter short-term cash-flow issues," Rohit Arora of Biz2Credit said, according to The Street. "Restaurants and retailers, in particular, find this type of financing attractive as they look to the fourth quarter to be more profitable than other parts of the year. Many businesses are seeking short-term working capital to prepare for the upcoming holiday season." Credit when needed most
Small business owners in need of cash rarely have time to waste, and this is especially true in the earliest stages of a company. Alternative financial services are a viable option for entrepreneurs in need of immediate cash, especially as traditional avenues tend to take longer. Small business owners should ensure they are assessing each alternative lender before signing on to ensure the beneficial procurement of credit.