Like most popular concepts on the Internet nowadays, there’s been a whole wealth of misinformation spread about alternative lending, some of which is far from the actual truth. To clear about some of this misinformation, the following exaggerations and falsehoods are debunked.
Online lenders will only offer high rates
While there may be a few lenders operating online who might be somewhat unscrupulous, the majority are respectable lenders who are providing a keenly needed service to businesses which might otherwise not secure funding. Where loan rates are higher, it is often because businesses are newer or have poor credit history, and they represent greater risk to the lenders.
Your credit score is top priority
This popular misconception is a carry-over from traditional banking qualifications, but does not pertain to alternative lending much at all. Instead, alternative lenders are far more interested in your business’s revenue streams, your financial statements, and your consistent cash flow.
Alternative lending is strictly impersonal
Unlike traditional lenders like banks, approval for loans from alternative sources do not depend on any kind of formula using debt ratio or income/outlay figures. A great deal of weight is instead assigned to your business plan, your customers’ payment habits, and your management team.
Approvals take as long as bank applications
This is far from the truth, largely because alternative lending is not subject to the same kind of heavy regulations as are banks and other institutions. One of the key benefits of alternative lending is the greater flexibility relative to providing loans, so that you can react quicker to business opportunities which might arise.
New businesses don’t qualify
This is another complete falsehood, since new businesses are often funded in alternative lending. Even in situations where there is little or no credit history for a given company, it’s still possible to secure funding for a new business. It may require that your personal finances are considered more heavily, but there is still a far greater likelihood of approval than from banks or other traditional lenders.