With the recession and business credit tightening, it’s been harder for small businesses to obtain loans. As a result alternative lending has become a growing industry. Un-conventional lenders are cropping up with all kinds of different approaches to an age old problem – financing a small business. But are the benefits of these alternative lending, business credit strategies worth the risk?
Cash strapped small businesses have been hit hard over the past couple of years. Small business owners, turned down by their banks, may start to feel desperate about their situations and are therefore more likely to fall prey to an alternative lending situation that can make matters worse. For some companies, this may not be any different (or better) than financing their business through the use of high interest credit cards.
From cash flow loans to purchase order financing, unconventional lenders are sprouting up all over to respond to the business credit needs of small businesses. Promising quick approval times and creative payback strategies; the high interest rates that are charged (anywhere from 18-40%) can easily outweigh the benefits for many cash strapped companies.
On the “Executive Inbox” blog from Crains last week, Anne Fisher wrote about one source of alternative lending – On Deck Capital, who claim to process loans in a matter of days and instead of sending a monthly bill, take smaller daily payments directly from the small business’ bank account. According the Small Business Financial Management
