What is Alternative Business Financing?

Most people are familiar with the process of getting a loan from the bank. But did you know there are other options that you can explore? These are called alternative financing institutions. But what are these organizations and why would you want to consider using them?

What is Alternative Financing?

Alternative financing is a very broad term. It applies to any financing that is provided outside of a bank. This can apply to things like getting a loan from your parents or a crowdfunding campaign. There are also some places, like the South Florida Funding Group, that will be able to deliver funding.

When Will You Need Alternative Funding?

If you are running a small business, there are plenty of reasons why you might need to seek funding. For example, you might want to start marketing yourself. This is the ideal way to attract more customers to your services. However, hiring an ad agency and putting the advertisements around town can be very expensive. A loan will ensure that you have the money to start making these investments.

In other cases, you might be ready to start scaling your business up. This can prove to be a lucrative investment. But, it’s also a cash-intensive proposition. A small business loan can often be the ideal solution. It will give you the funds you need to get everything set-up properly and allow the money to start rolling in.

A third example is that an unexpected expense occurs. For example, your stock might be damaged due to the weather. You might need to get a vital piece of equipment. At these times, you’ll need fast money. An alternative lender will often be able to move faster than a bank. This will allow you to recover smoothly from these unexpected situations.

Why Should You Use Alternative Financing?

There are plenty of reasons why you might want to consider using an alternative financing lender. First, banks tend to have strict lending criteria. If you have a bad credit rating you often won’t be able to access funding. In other cases, you might have a history of defaults or the business might not be making enough money. Thankfully, there is another option to explore when banks say no. Alternative lenders will be willing to step in, giving you the funds you need.

Another reason why people like to use alternative financing is because of its speed. The banks will often take several weeks to assess and approve a loan. If you are in urgent need of the money, this process will take too long. Because of this, many people opt to turn to alternative funding. They will be able to assess your claim quickly. In most cases, you will know whether you have been approved for funding within 48 hours. Once you are approved, the money can be in your account in a matter of days.

One of the biggest problems with an agreement made with a bank is how rigid it is. There will often be strict rules that need to be followed. They often won’t care if your circumstances change and you can no longer afford the repayments. When you go with an alternative finance provider, they will be more willing to change. Some of the financing options have been specifically designed to adjust to times when the business slows down. This will make it easier for you to continue to make your repayments.

Are There Downsides to Alternative Business Financing? 

Before considering an alternative business financing agreement, there are some potential downsides that you should consider. First, to compensate for the higher risk, it’s common for some brokers to require a higher interest rate. Because of this, you will need to pay more across the life of the loan.

Secondly, it’s possible that the business might fail or that you might be unable to repay the loan. If this happens, there are a few consequences. First, you might lose the collateral that you put up to secure the loan. It’s also possible that you might be made personally responsible for the loan. Before you sign the loan agreement, make sure that you understand the risks involved. This will let you make an informed decision about whether it’s the best choice for your business.

What Types of Alternative Business Financing are Available?

One of the benefits of choosing an alternative business loan is the wide range of funding options available. This will make it easy to find one that offers the terms and timeline that best suits you.  Let’s explore some of the available programs.

First, you might want to consider getting a merchant cash advance. These will allow you to get a quick injection of capital. They are popular because of how easy they are to repay. Each month you will need to provide a percentage of your credit card sales. These will ensure that the repayments don’t impact the financial health of the organization.

Secondly, you might want to consider an unsecured line of credit. Once approved, you will have a maximum amount of money that you can borrow. Then, when you need funds, you can dip into the line of credit. You’ll also need to pay interest on the money that you have purchased. How long you will have to repay the loan will depend on the amount that you have been lent.

Alternative business financers will also offer both secured and unsecured business loans. If you have a good credit score, you might want to consider an unsecured business loan. This means that you won’t have to put up collateral. However, you might be required to make a promise to become personally responsible for the loan if the business can’t pay. The secured business loan option will allow you to put up collateral. Unlike bank loans, the amount you’ll need to pay each month can vary. In some cases, the revenues will drop. If this is the case, your repayments might also fall. When revenues rise, your repayment rates won’t change.

Another option to explore is equipment leasing or financing. This will ensure that your business can get the tools it needs to function properly. In this case, you’ll just need to make some monthly repayments. If you use equipment leasing, you will own the item when the repayment period has come to an end.

You can also work with an alternative finance provider to get an SBA loan. This is considered the gold standard of small business startup loans. They will be backed by the Small Business Administration. These are often used to fund larger projects. For example, you will be able to use them to purchase real estate. If you need a smaller cash injection you can explore a microloan.

Lastly, there is a range of loans available to help businesses purchase a property. This will cover a wide range of commercial real estate types. These include funding for people who are engaged in property flipping. Businesses involved in hemp and cannabis might also be eligible for funding.

Contact South Florida Funding Group

If you are looking for business financing, you have two options. You can either head into a bank. Or you can contact an alternative financing group. They will often be able to offer a better deal, with multiple funding options for you to explore. If you want to learn more about alternative financing, contact South Florida Funding Group: 786-544-2700. One of our friendly people will be able to talk you through your options and find the right funding model for your business.