Why small businesses are turning to alternative lenders

lenders, lending
lend – cube with letters sign with wooden cubes

When it comes to financing options for small businesses, banks are usually the first option, however, with more than 50 per cent of SME loans being rejected every year, more and more businesses are turning to alternative lenders.

There are several reasons why. Alternative lenders offer several advantages over banks. For a start, they have higher approval rates and a faster application process, but there’s also a more personal and supportive approach.

Small businesses seek loans for a number of business activities. The top reasons include maintaining short-term cas flow or liquidity, replacing or purchasing additional equipment and machinery, or pursuing expansion opportunities. Here are some of the reasons why small businesses are turning to alternative lenders.

They’re faster

Alternative lenders have an easier and faster application process. Unlike banks with their long processing times and constant obstacles, alternative lenders offer shorter processing times and quicker access to funds.

Businesses need to make decisions quickly. I recently assisted a business in purchasing a significant amount of stock that was being offered at a heavily reduced price by the supplier. The customer had only a matter of days to come up with the funds, which the business wasn’t going to have within the timeframe.

By providing the loan, the customer was able to secure the stock and improve his profit margin on every job completed over the following six months. The customer’s bank could not deliver the outcome within the timeframe, so he turned to an alternative lender for assistance.

A study by YouGov also showed that small-business owners are time poor with 27 per cent of owners recording a 50+ hour working week, and 24 per cent reporting a seven-day working week. This highlights the need for a quick application and funding process.

They’re flexible

Small businesses need a lender that will understand their unique needs. Alternative lenders are crucial for small businesses as they work towards creating custom solutions that support these needs. Whether it is a unique proposal, no early pay-out fee or a variety of loan options, alternative lenders offer services that the banks can’t.

They’re risk free

I see many quality businesses denied access to credit because they don’t have a property, or they are in dispute with another party. Often, alternative lenders offer unsecured loans meaning you don’t need to own a property and your personal assets aren’t at risk. This is a stark contrast to banks and other financial institutions who require assets to secure the loan, making it riskier for small businesses to consider financial support.

They’re supportive

The primary goal of alternative lenders is to support small businesses and assist them in filling in the gaps left by larger financial institutions. Alternative lenders support businesses to bridge this gap and turn potential growth opportunities into revenue raising activities.

We genuinely want to learn about the customer’s business and its opportunity to gauge whether we offer a suitable solution. We actively engage our quality finance broker network to assist the customer in finding the best product and lender for their situation.

Ultimately, alternative lenders support businesses to have the power and freedom to take advantage of the opportunities that will successfully grow their business.

Olly Guilleaume, National Manager, Limba