Alternative Lending for Millennial-owned Businesses

Who are Millennials? Millennials or Generation Y are those born in or after 1981 to 2000, and they are taking over the world. According to current research, millennials are 1.7 billion individuals around the world.

The millennials are one of the largest ethnically diverse and technology-savvy population. Being born into recession and terrorism, molded them into people that are not easy to understand.

The millennials have been stereotyped as entitled and lazy but also innovative and creative.3815 Oak Ridge Cir
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Millennials fall between the ages of 19-35. It is not surprising that every strategy and business models revolve around them as they are moving to their prime spending years. So, many financial institutions are trying to cater to this demographic need.

In this content, we will get detailed knowledge about millennials and their problems with a bank loan.

Table of Content:

• What do millennials want?
• Problems with bank loans
• Why is alternative financing more attractive?
• Technology and alternative funding
• Conclusion

What Do Millennials Want?

As the stereotype suggests, this generation is lazy, and so they try and find the easy way for millennial business loans. All the young entrepreneurs who are or have already stepped in the world of business want easy access to capital.

It has been surveyed that almost 70% of the millennials around the globe feel that banks are the only transaction-based while nearly 60% don't own a credit card.

Typically, millennials are technology savvy, and thus digital engagement plays a vital role in their lives, and therefore they are also online consumers.

All the technology-driven population wants to find shorter and less complicated ways. So, they are searching for more accessible ways to get a loan.

 

Problems with Bank Loans

According to the surveys in America, only around 10% of the millennials have taken a home equity loan or a loan to fund their small business.

This is because taking a loan from the bank demanded credit history. The millennials didn’t have enough time to build up their credit history to acquire the traditional lending method.

So, the millennials are becoming more and more disillusioned from the classic lending methods and are looking for alternative financing options that include peer to peer (P2P), payday lenders, pawnshops, merchant cash advance, etc. to meet their financial needs.

 

Why Is Alternative Financing More Attractive?

A survey revealed that almost 14% of millennials have taken loans from peer to peer networks, and nearly 11% have used microlenders for start-up cash for their business. This shows that many millennials have been opting for alternative methods of financing rather than using the traditional methods.

This is due to many reasons, and some of them are:

• One of the significant reasons that alternative financing is taking hold is easy accessibility. No credit history is required to get some advance cash, even people with bad credit, or no credit at all can easily get short-term cash like payday lenders.
• Many millennials are drowning in student loans, and there’s a growing distrust towards the banks. Many of them, therefore, try to look for more flexible and smaller loan alternatives.
• Although traditional financing will always be preferred when more jumbo loans are being considered, the younger generation want smaller loans that help cover their regular expenses. So, as larger loan lenders are not catering to these more minor needs, thus alternative financing methods are being preferred as they provide to millennials more modest needs.
• Most of all, alternative financing's most significant positive point is that it has a fast turnaround.

The younger generation wants smaller and quicker routes for everything, and that is what alternative business funding provides. It allows them to get the loan on the same day and caters to their most urgent needs while banks usually take longer, they first must do a long process of credit appraisal after which the loan is offered.  Further, the banks might take months to approve a loan.

• Banks come with long and complicated repayment terms, whereas microloans are easier and efficient.

Most traditional repayments methods require legal assistance if the loan cannot be repaid on time, and most millennials can't afford this option. Alternatively, other methods have more straightforward and understandable terms that appeal to them.

Many reasons attract this generation to alternative means over classic banking methods, but these were the top concerns.

Technology and Alternative Business Funding

Technology has played a crucial role in promoting alternative business financing methods. As the millennials are technology-driven, they want to do everything digitally too.

And many alternative lenders use this opportunity and so target the millennials digitally. The millennials love doing business online, and there’s greater opportunity for funding.

Also, as most of the millennials have grown up online, they trust the internet and thus do not deter when financing opportunities arise on the internet.

When with a couple of keystrokes, millennials can find more straightforward and alternative methods for alternative financing, they tend to use it. The banks have become complicated, and getting funding from the bank, even at lesser interest rates, is extremely difficult.

This has pushed the millennials to think out of the box and take the opportunities that the internet offers. Technology has, thus, helped in opening doors that were previously considered impossible.

They have provided the millennials with so many options that help them find the right fit for them.

Conclusion

Many reasons can deter millennials from traditional lending methods. But as seen, the millennials are rightly stereotyped as lazy as they avoid the conventional methods due to their complexity and their lack of convivence.

The question is, when they are provided with many alternative business funding and more accessible lending methods, why wouldn't the millennials opt for the more affordable and convenient option.

At South Florida Funding Group: WE FUND THE IMPOSSIBLE, EVEN CANNABIS!