Conventional lenders, such as credit unions, banks, and the Small Business Administration “SBA” provide promising lending options for Small and Mid-Sized Enterprises “SMEs”. These lending services offer a broad range of advantages, such as lower fees and better terms. There is no doubt, the lending process for these establishments is far from easy. In fact, financial institutions have extensive lending processes to ensure fairness across the industry. With this said, the odds of getting approval for a loan from one of these popular SME funding partners are very low. The stringent approval requirements rule the majority of SME applicants out, which is very unfortunate, but there is hope if you consider alternative lenders.
Alternative Funding For SMEs
Before any startup gets off the ground, funding must be secured by the project owner. Of course, your first option is the SBA or an aforementioned traditional lender. Once the applicant determines their standards – business credit score, down payment, and debt-to-income ratio – do not meet the stringent requirements, they may feel like giving up. It is crucial to remember there are lending alternatives for SMEs that have been previously denied a loan through traditional lenders or the SBA.
Alternative lenders include direct online lenders, marketplace lenders, crowdfunding, and private lenders. So, there are funding opens even when you feel like there are none.
Why Borrow From An SME Alternative?
SME alternative financing offers a variety of benefits. Keeping these benefits in mind, a small business loan denial does not mean you should scrap your startup plans. Unlike conventional small- and medium-sized business loan applications, the alternative lending application is simple. To ensure convenience throughout the lending process, alternative lenders have simplified their SME applications.
Quicker Response Time
When consumers set out to borrow money for an SME, they know the process is not going to be quick. In fact, they expect the turnaround to drag out for weeks or even months in some cases. When the traditional lending approval process is compared to that of the alternative lender, the turnaround is almost always shorter. As previously mentioned, alternative lenders generally utilize simplified loan applications, resulting in a shorter turnaround. Of course, you should always expect delays in the approval process because there is no guarantee of a quick response time.
More Extensive Lending Options
Traditional lenders are limited with it comes to small business loans. Alternative lenders, on the other hand, offer more lending options for SMEs. You can choose from collateral and line of credit loans, not just the conventional SME loan.
Not every SME makes a traditional lender their first stop when seeking a small business loan. The traditional SME alternative loan can help secure funding for a down payment. For example, an applicant cannot come up with enough money to cover the required down payment, an alternative lender may be able to help. Thanks to the various lending options offered by alternative lenders, it may be possible to secure funding for the down payment.
When your small business loan application is denied, it is important to keep a clear head. There are alternative lenders willing to step up to ensure you get your startup funding.