Starting a small business without enough funds could be impossible. The good thing is that you can just borrow money to get the business rolling. Most business owners in the past would immediately head to the banks to borrow money. These days, alternative lending options are considered more.
If you are planning to start your own business, you should also check the difference between the two before you decide which one to partner with.
When it comes to security, you have nothing to worry about with traditional banks. You borrow money from them and you pay them back based on the terms and conditions. You won’t worry about hidden charges or being fooled as they have a reputation to maintain. You can’t say the same for new lending companies that you may not have even heard of before.
There are tons of requirements when you decide to borrow from a bank though. Since the 2008 financial crisis, banks have tightened their restrictions, especially for small business owners. You have to prove a lot before you are allowed to borrow. Having a good credit score is a huge advantage. If you have messed up your finances in the past, your chances of getting accepted might be low.
Banks have lower interest rates and higher maximum rate. This means that you can borrow a huge amount of money if you are bankrolling an ambitious business. As the interest rates are low, it won’t be a burden for you. The repayment scheme could be the problem as banks are really tight. If you are asked to pay on time, you have to do so. Otherwise, you will suffer from really high penalties.
Alternative lending options
There are different alternatives to banks if you want better choices. Online lenders are now everywhere and they cater mainly to small business owners. If you get rejected by banks, you are assured that your chances of having your application accepted are a lot higher.
There are risks that come with it though. To start with, being very careful with whom you partner with is a must. You just can’t apply from any online lending firm you can find, no matter how tempting the terms and conditions are. Some of them might not even be running a legit business. Borrowing money from them is like putting your entire business at risk.
Once you have found the perfect partner, moving forward would be easier. These alternative options have sky high interest rates, but some of them have more flexible repayment scheme. Just in case your business doesn’t do well on its first months, you can relax and do better for the succeeding months. The moment your business starts doing well, you can easily repay your loans.
The best part in choosing these alternative options is the speed in which your application will be granted. There are even some of them where you can instantly receive the amount you have borrowed within 24 hours.
Ultimately, you will decide which of these options would be best for your plans to expand your business. Try checking all possible options first. Compare them using different standards such as credit limit, interest rate, repayment scheme and many others to ensure you are partnering with the right company.
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