The 2008 financial crisis caused banks to tighten restrictions on small business loans. They focused on larger loans as they are more profitable. With the economic downturn that resulted from the COVID pandemic, traditional business financing is harder to secure than ever. Grant programs such as the PPP (Payroll Protection Program) and EIDL(Economic Injury Disaster Loan) have dried up. Business owners that are still struggling to recover are looking for alternative funding options to keep their businesses afloat. However, this is not the only reason business financing alternatives are becoming more popular with business owners. They offer benefits beyond funding.
Faster and Easier Application Process
One of the biggest frustrations of traditional business financing is how long it takes to get a loan. Certain steps must be taken before the bank will even accept the application. Then once it is submitted, approval can take anywhere from a couple of days to months. That can be too long to wait for businesses that need funding fast.
Business finance alternatives typically require less information than banks, making the application and approval processes much quicker. Businesses can often have the funds they need within days, allowing them to spend less time searching for financing and more time on taking care of business.
Work with Industries Banks Turn Away
Even if you have all the proper documentation prepared when applying for a traditional loan, certain industries have been “black listed” by banks insured by the FDIC (Federal Deposit Insurance Corporation). The reason is that those businesses are considered high risk and the FDIC won’t insure banks that issue high-risk loans.
Businesses that work with alternative lenders often find more success when looking for business financing. Business owners should do their research and weigh their options. If your business is typically turned away by banks, don’t waste valuable time jumping through their hoops. Instead, consider the business finance alternatives.
The Focus is on You
Unless you’ve been dealing with the same bank forever, most of them will just take your mounds of paperwork and follow a standard checklist to see if you qualify for financing. Alternative lenders focus on understanding your business and building a relationship. This may not seem all that important at first but think about it.
Many business finance alternatives provide short-term financing, something many businesses will need more than once. Establishing a relationship with an alternative lender will make the process even easier the next time you apply. With a bank loan, you have to go through the entire application process every time, and the chances of being approved are slim. Alternative lenders work hard to get your application approved for funding.
More Flexible Funding
If approved for a traditional bank loan, beware. They often come with strings attached called loan covenants. These covenants place restrictions on how you can spend the funds you received. Do you want someone else telling you how to invest in your business?
With most business finance alternatives, once you have been approved and received funding, you can spend those funds how you see fit. Some options, like the merchant cash advance, include repayment amounts that fluctuate with your cash flow.
Are Business Finance Alternatives Right For You?
If you need immediate funding or have been denied a traditional loan, alternative financing options could be the answer to your problem. At CapFlow Funding Group, we value each of our clients and work hard to provide them with the perfect funding solution for their business. Our team works with various industries and specializes in invoice factoring and merchant cash advances. If neither of these fits your needs, we will work with trusted partners to get the funding you need. Contact us today. We’re looking forward to getting to know you.