Issues with traditional bank loans

Traditional bank loans have long been a common source of funding for individuals and businesses alike. However, they come with a range of issues and drawbacks that can make the borrowing process less favorable for certain borrowers.

Here are some key issues associated with traditional bank loans:

· Stringent Eligibility Criteria (High Credit Scores Required-680+)

· Lengthy Approval Process (25-45 Days Typical)

· Collateral Requirements (Required in many cases)

· Lack of Flexibility (Have a few loan products available)

· Limited Accessibility (Often required to be in their “footprint” area)

What is alternative lending?

Alternative lending is lending that occurs outside the banking system. Banks have historically had high eligibility requirements for their borrowers. Alternative business lending emerged as a way to give business owners easier access to capital.

As with a traditional bank, alternative lenders supply capital or credit to qualified borrowers, set repayment terms, then charge interest. However, with alternative lenders there’s usually no brick-and-mortar establishment to visit. Alternative business loan applications, customer service interactions, and fund transfers happen digitally.

4 benefits of alternative business lending with online lenders

Here are four compelling reasons to consider alternative lenders over traditional banks.

1. Easier access to capital

The primary reason business owners turn to alternative lenders is because they need easier access to capital. Banks are notorious for having rigid credit qualifications (looking for credit scores of 680+, while alternative lenders tend to be more lenient with their small business loans.

The average alternative lender wants to see a credit score of at least 550, though some online lenders allow lower scores as long as you meet other criteria (like having a history of steady cash flow or consistent revenue growth). Plus, while banks generally don’t lend to businesses that have less than two years of experience, many online lenders consider small businesses with just six months of operating history.

2. More options

Using alternative lenders gives you more options for sourcing the business financing you need. Alternative lenders, for example, specialize not just in term loans and business lines of credit—they also offer SBA loans, equipment financing, invoice factoring, merchant cash advances, and microloans.

3. Simple application processes

Alternative lenders typically have straightforward loan applications, plus the process is more condensed than at a traditional bank. You can usually check your credit score for free before applying. From there, you upload a handful of business and financial documents (like recent bank statements and profit and loss statements), fill out a one-page form, then click submit straight from your mobile device, monitor, or tablet.

4. Fast turnaround times

Online lenders are all about efficiency. Many alternative lenders use a combination of experienced underwriters and advanced underwriting software to expedite the application review and loan approval process. That means you can hear back from some lenders in as little as a day, compared to the weeks or months that many banks take to sort through and underwrite their loan applications.