Entrepreneurs 5 Reasons Why You Should Use An Alternative Lender - Work It Daily

Entrepreneurs 5 Reasons Why You Should Use An Alternative Lender - Work It Daily You’ve always dreamed of quitting your boring job and starting your own business. You have the plan all mapped out in your head: you’ll work from home to finally bring your big idea to life. After all, life’s too short to forever stay invisible inside your cubicle! But did you know that home-based businesses are less likely to qualify for a bank loan? In this day and age, finding money to nourish a business can be a challenge. If you're a business owner or you’re thinking about starting a business, you might want to consider using an alternative lender. What’s An Alternative Lender? According to Andrew Cravenho, founder and CEO of CBAC Funding, alternative lenders are lenders who lend to businesses that may not qualify for a bank loan. There are many reasons why a business may not qualify for a bank loan: Poor credit or no credit Home-based business Loan amount too small Prior bankruptcy New business Why You Should Use An Alternative Lender If this applies to your business, you should consider using an alternative lender to help you get your business on its feet. Here are five reasons why: 1. Capital “In today's economy, businesses are having more difficulty trying to obtain a small business loan from a bank than at any other time in history,” said Cravenho. The main reason businesses are having a tough time borrowing money? Tighter restrictions on credit requirements. Alternative lenders help businesses obtain the much needed capital to operate their business effectively. 2. Creative Financing Options Alternative lenders use creative financing options such as invoice factoring to help a business raise the cash needed to grow or operate their business. Invoice factoring uses the equity locked up in their unpaid invoices to obtain the immediate cash they're looking for. 3. Credit Unlike a traditional bank loan, alternative lenders or asset-based lenders use the credit of the business's debtors to determine whether the money borrowed will be paid back on time. “This is advantageous to a start-up or rapidly growing business because these types of businesses usually do not have the credit necessary to obtain a typical small business loan,” said Cravenho. 4. Interest According to Cravenho, small business loans require a business to pay back interest and principal on a monthly basis, regardless of whether or not the business made money that month. “This can cause major problems for a business's cash flow and can sometimes cause a business to file for bankruptcy,” he said. With invoice factoring, a business doesn't have to worry about paying back the factoring company. Once the factoring company purchases the invoices from the business, it's up to the factoring company to collect on the invoice - leaving the business do what it does best, run its business. 5. Cash Flow Cash flow is the final reason why a new business should use an alternative lender as opposed to a bank loan to finance their business. With a typical bank loan, the bank lends a set amount of money to the business and its job is done. Alternative lenders continue to lend money whenever an approved debtor is sent an invoice, according to Cravenho. This helps a business free up working capital, allowing it to expand at an exponential rate. Don’t let a lack of bank loans keep you from making your business come to life. Remember, you have options! If you want longer-term funding, a site like Pave might be a great match for you. Instead of owing a specific amount of money, you pay lenders a percentage of your future income. If you'd prefer a project-based boost, try Kickstarter or Indiegogo, and you'll know what type of audience to expect for your goods or services. What’s your business idea? How will you make it happen? Photo Credit: Shutterstock Have you joined our career growth club?Join For Free!