Why would you seek alternative lending credit with all the banks around? Banks typically do not offer quick turnaround on loans and may have stricter lending policies. If you have a poor credit score you may find banks are not an realistic option. However, the market now offers a range of alternative lenders who could be your life line in a crisis. These institutions use artificial intelligence and big data. Hence, they can process your loan applications faster, and provide funds on the same day in some cases.
Many do not rely solely on your FICO score, and may offer flexible repayment options. For example, you might want to repay a three year loan in one year without penalty. Or you may need a grace period of a few months before you start making the loan repayments. Alternative lenders offer these kinds of arrangements – and more.
7 Alternative Lending Options With Some of the Best Services
Alternative lending has a reputation for higher interest rates than banks. You need to carefully evaluate the cost of the money versus what it will do for your business and make an informed decision on how much to borrow and from whom. There also are alternative credit possibilities. Below are seven of the alternative lending options.
7. On Deck
On deck may give you a loan even if you were turned down by a bank. You will find its interest rates a bit steep compared to your bank.
It is a good choice if:
- You need quick cash: Their application process is simple; you can do it on your phone in about ten minutes. On Deck typically respond within 24 hours with a decline or approval.
- You have a poor credit score: With a score of 500, you might still get a loan approved. A score of 600 is necessary if you need a line of credit.
- You encounter unexpected expense or inconsistent cash flow: You can get the cash quite fast, whether for an immediate need or to keep you afloat till the next cash inflow as the loans are quick.
Kabbage is one of the giants in alternative lending. It mainly provides working capital to businesses. The cost of its loans is quite high. The rates range from 24% to 99%.
This option will do if:
- You have a bad credit score: They don’t attach a lot of weight to your credit history as long as your score hits more than 500.
- Need cash fast and will repay in a short period: You’ll find it easy to apply for their loans, and they’ll send you cash in a few days. Most of their loans have short repayment times. They offer up to $150,000 with repayment in a year.
Accion is a nonprofit international microfinance institution. As such, it is the more transparent (you can read their annual reports for several years on their website). It targets small businesses and lends funds between $300 and $1,000,000. Its major downside is the security you need to get its loans.
It is good for you if:
- You need quick cash: For loans amounting to less $ 5,000, you can get an approval in 48 hours.
- You have a low credit score: With a score of 575, you can get a loan from Accion. However, you also need to be on good terms with your creditors.
It offers loans that range from $5,000 to $600,000 to small and medium sized businesses. It does not ask for collateral, unlike other players in alternative lending. Its rates are among the best for alternative lenders.
- It is good for you if you want quick cash. The loan application process is simple; you need to provide some information about your business. The application is processed within 48 hours in most cases.
Foundation also offers an easy application process and more modest interest. You can repay a foundation loan ahead of schedule at no extra cost.
It’s a good fit if:
- You have a low credit score: With a score of 600, you meet the first threshold that allows you to apply for their loans. After that, you’ll also need to have in business for two years among other conditions.
- You need a cheap loan: Outside of banks these rates which vary from 7.99 t0 29.99% are some of the best you can find. The rate you get will depend on your application and details.
It is one of the bigger players in alternative lending, and one of its packages targets merchant cash advances.Its strength lies in the simple procedure you need to follow when applying for a loan. It has no costs tagged to the credit, unlike other alternative lenders. Its main drawback is that your business must have a physical location.
It is good for you if:
- You need quick cash: The loan application process is quite short, and the approval usually takes less than 24 hours. You will find cash in your account after around three days if the application is successful.
Biz2Credit is not a lender, but a lending marketplace which links borrowers to potential lenders.
- Unlike other players in alternative lending, you get more flexible terms.
- You can also get funding with a low credit score.
- Applying for a loan in this platform is relatively easy and takes a short time.
One drawback to this site is the potentially longer wait period to funding.
As you can see, there are options in alternative lending. Most of these lenders focus on small business. Each has plusses and minuses from the borrowers perspective and each may be more appropriate for different market niches.
However, the business world is dynamic, rates will shift, and new players will come up with better products. Research is crucial. Read all the small print and have your lawyer do the same. It is also important to have a fall back plan for your loan repayment should your investment fail to yield expected returns even before your approach any lender.