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The global pandemic has changed the game for nearly all industries, the lending field included. Many small businesses have been left searching for help in the form of business loans, but they may not realize the growing number of available resources. 

Traditional lending typically consists of a borrower visiting their local bank and working with a single banker to get the best rates and terms. While there is by no means anything wrong with this strategy, borrowers are adding an unnecessary level of risk to their experience by relying heavily on a single source for funding.

Each bank and lender has a slight variation of underwriting criteria that govern the loans they are able to approve. A borrower’s funding request may fall outside a single bank’s criteria and lead to a decline. The challenging part for the borrower is not knowing this until weeks or months into the underwriting process. 

In an ideal situation, borrowers would be able to cast out multiple lines and engage multiple lenders to underwrite the request simultaneously. Luckily, that’s exactly what we do at Innovative Capital Corporation. We’ve spent years developing relationships with various lending partners, from traditional banks to private lenders and everything in between. These relationships give us unique insight into what deals specific lenders will be most interested in closing and which fall outside their credit window. What’s the result? We can save borrowers the hassle of waiting weeks or months to figure it out. While using banks offers to compete against one another.  

Rather than surveying one option at a time, our Innovative Capital team will share your needs with an array of partners that we think will be interested in funding your request. Our mission is to find you the best rates and terms for the deal you’re looking for from one of our many partners. The best part? If you’re not happy with the deal(s) that we present to you as options, you don’t pay us. We’re so confident in our ability to find you the best deal to meet your business’ needs that you only pay our fee if you decide to take our deal. 

As we mentioned, our success comes mainly from the diversity of our lending partners. There’s no denying that the past couple of years have created a new playing field for financing. Borrowers have more options available to them than ever before, but many aren’t aware of them. You may be wondering, what is alternate financing? Is it the right option for me? What various options do I have within alternative financing? We’re answering all those and more in our guide to alternative lending below. 

What is alternative financing?

Alternative financing is any lending outside of a traditional financial institution. Alternative loans are frequently more flexible than conventional loans and often experience faster turnaround times. Loans that might have traditionally taken weeks, if not months to finance, may be funded in as little as a few days. 

Another benefit of alternative financing is that the application process tends to be simpler than traditional lending institutions. 

What types of alternative financing are available? 

As mentioned earlier, there are a variety of different types of alternative financing available. Some include the following:

  • Bridge loans 

    • A loan to cover an interval between two transactions.  
    • For example, a bridge loan can be used to acquire a business or real estate.  Once the asset is under the control of the new party, they can refinance to a new long-term loan with a lower cost of capital. The Bridge Loan is used for speed and to improve the offer from the perspective of the seller.  We can fund these loans in as little as seven days. 
  • Asset-Based Loan   

    • A loan that is backed by an asset rather than by a borrower’s credit score. 
    • For example, if a business owner or Real Estate Investor wants to purchase a new property, they can use existing assets to securitize a loan.
  • Purchase Order Funding:  

    • Provides capital to help a business grow operations and meet the demands of their purchase orders.  
    • For example, an organization makes Personal Protection Equipment.  A pandemic occurs increasing demand and the size of purchase orders.  A business can receive capital to grow operations to meet the new demand.  
  • Factor Financing 

    • Provides quick cash flow in exchange for accounts receivable and/or other assets.  
    • For example, a business can utilize its invoices/accounts receivable as leverage to obtain capital to support its business.  
  • Equipment financing 

    • Equipment financing involves using a loan to purchase or refinance the equipment necessary for a business to function. These loans are unique from other business loans because they require the use of the physical equipment as collateral for the loan.
  • Lines of credit

    • A line of credit works similarly to a credit card. This option allows you to withdraw funds as needed and pay them back over time at a set interest rate. As is the case with a credit card, the funds will replenish as you repay the balance. The rates associated are much lower than a standard credit card and allow for larger loan amounts. 
  • Hard Money Loan: 

    • Private investors issue hard money loans as opposed to traditional loans backed by banks. They are typically shorter-term loans, about 6 – 24 months. These loans are quick to fund and are used when conventional financing isn’t an option. These loans are typically interest-only and tied to real estate.

When is alternative lending a good idea for your business?

Alternative lending is an excellent solution for businesses when traditional funding is not available or does not meet the borrower’s needs. If a borrower, their business, or property does not meet the minimum requirements that lenders are willing to issue a loan, they may find better success turning to a private lender. In general, lenders that operate in the alternative financing space take a common-sense approach to underwriting credit and are not impeded by the underwriting criteria imposed by traditional banks.  

What are the benefits of alternative financing?

Alternative financing may offer borrowers just the advantages they need to make their ideal loan a reality. Some of the benefits of alternative financing include: 

  • Simple application process:  Traditional financial institutions typically require the submission of an extensive list of information from borrowers. By focusing on the core business, alternative lenders are able to qualify a borrower with less hassle.  
  • Fast turnaround: Speed is key when it comes to funding. While traditional lending usually takes weeks or months to fulfill, alternative lending deals can be finalized within a matter of days. 
  • Flexible loans: The flexibility of private investors is due to the fact that they’re responsible for making their own decisions. Rather than trying to appeal to a commercial banker who is merely following the rules and regulations laid out for him by the institution, private lenders have the freedom to make whatever deals they see fit. 

If your business requires financing and you’re in the process of shopping for a loan, reach out to our team of loan officers at Innovative Capital Corporation. Our qualified team will engage our extensive network to obtain the best financing options available. If you have questions or would like to run a loan request by our team please contact us.

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