+1 (888) 963-6130
When small businesses apply for traditional bank loans, they get turned down at record rates. Analysts claim that anywhere from 20 to 80 percent of small business applicants get rejected when looking for funding. To close the gap and access the funds they need, many small businesses are turning to alterative lenders.
Thinking about applying for a loan from an alternative lender? Wondering how to find the best lender? How to apply for a small business loan? And, how to improve your chances of being successful? Here’s what you need to do.
1. Find a Reputable Lender or Capital Provider
Fintech lenders are largely regulated by different rules than their banking counterparts. As a result, it’s up to you to do the research to figure out whether a lender or capital provider is credible or not. Check out their rating with the Better Business Bureau, look closely at their fee structure, and read online reviews from other borrowers.
It’s also important to go beyond that. Poke around the lender’s website. What type of information do they offer? Do they seem committed to educating their clients about the alternative lending process and business finances in general? Do they provide tips on how to apply for a small business loan? Ideally, you want to work with a lender who’s a true expert in their field.
Note that the key difference between a lender and a capital provider tends to be how the loan is repaid. Lenders tend to put you on an installment schedule, where you pay the same repayment every month. Capital advance providers, in contrast, often peg repayments to your future revenue. For instance, you may pay a certain percentage of revenue. That can make it easier to stay on top of repayments.
2. Get Your Documents in Order
When you apply for a small business loan or capital advance, you need to provide the funding company with a snapshot of your financials. Gather your bank records and financial statements for the last quarter to six months. In most cases, lenders may also want to look at your personal financial records—that’s especially true if you’re a sole proprietor or part of a small partnership.
Alternative lenders often use different creditworthiness indicators than traditional banks. They want to see how your business has been doing, but they also want information to help them make projections about your future potential to repay the loan.
These lenders often look at everything from details in your accounting software to social media engagement to sales trends from your online stores. So you can easily share this information, make sure you have your account sign-in details when applying for a small business alternative loan.
3. Consider the Software or Apps Underlying the Lender’s Process
Alternative lenders and fintech companies use a range of technical tools to review your information. If possible, try to figure out which tools the company uses when reviewing the loan. Tools such as Decision Logic and Yodlee are ideal.
While the exact process behind the scenes is complicated, using them as a customer couldn’t be easier. These tools basically allow the lender to access your business banking information safely and quickly. For instance, you may be asked to enter your login credentials just once – instead of downloading and transmitting statements yourself.
4. Be Clear About Your Needs
This can be a critical element of applying for both traditional and alternative funding. When putting together your application, take some time to note why you want the funds.
If possible, make some projections about how much you plan to spend and how you think that capital injection will affect your business. Then, create a timeline for how you plan to use the funds as well as how you plan to pay them back.
Now that you know how to apply for a small business loan, it’s time to start the process. Spend some time researching lenders and gathering your information. Then, jump right in. It may be easier than you think.
11 Comments on “How to Apply for a Small Business Loan Alternative”
It makes sense that small businesses could benefit from taking a loan. It’s definitely a good idea for them to seek a reputable lender! That way they can get a good head start and pay off their loans with their earnings.
My sister wants to open her own business and she needs more cash for added capital. It was suggested here that she should find a reputable lender of the capital provider. Furthermore, it’s recommended to consult a professional when considering an alternative business loan.
It was helpful to know that you should have a copy of your bank records and financial statements because lenders want to know the standing of your business. This is a good tip for me because I want to put up a small business in the future. I want to be part of the food industry since I love to cook and bake. My goal is to share my talent for cooking. Since I’m interested in applying for a business loan when my business becomes a bit stable, I’ll do all your tips.
It’s good advice when you said that it’s important to research first for the lender’s credibility before getting a loan transaction. This can save you from any financial troubles in the future. In the event that I will own a small business, I will definitely seek for loan assistance for my business operation. And I will look for the most credible financing program in the area.
That’s a good idea to be clear about your needs. That way you could make sure to let them know exactly how much money you need. I’ll have to make a detailed plan for when I go in to ask for a loan.
I believe that small business cash advances are critical if you have urgent expenses to cover. You made a great point when you said that alternative lenders use technical tools to review information. If I were to need a cash advance, I would make sure to find the best financial institution to work with.
Being clear about your needs will help pick a perfect loan. I know that my sister was thinking about getting this type of professional help. It might be wise for her to know that she should look to a professional loan service.
I like that you state that it’s important to make sure you have a clear vision of your needs. My brother is looking for a way to expand his marketing department so he can start getting more of his product out there. I will send him this information so he can make sure to look into a capital funding consultation.
It’s good to know that you should have your bank records and financial statements organized when looking for a business loan. My brother wants to open up a store and needs to know what he should have prepared when requesting a business loan. I will be sure to tell him that he needs to keep his documents organized for when it is time for him to get the loan that he needs.
Absolutely great information it is. But the major problem nowadays is most of the Banks prefer to lend to established businesses and that is the worst aspect of money lending.
I liked that you said that alternative lenders usually use different methods than banks to determine creditworthiness. I have been thinking about getting a loan to start out my small clothing business, but I need to make sure I have the right documents and the right information at hand. I am glad that I found this article so I can make sure I know exactly the decision I should make.