In the wake of the financial crisis of 2008, many banks tightened their lending policies and became much more stringent about which loans they agreed to give out. To fill the gaps left by traditional bank loans, a network of alternative financing options became important for business survival. While the economy has been slowly improving since the recession, the world of alternative financing continues to play a role in the growth of many businesses and just might be right for yours as well. Learn more about alternative financing and why going to a bank is not always your best option in today’s blog.
Is Alternative Financing the Right Option For My Business?
What is alternative financing?
Alternative financing is an umbrella term for money that comes from a lender that is not a bank. These sources are incredibly important as traditional banks reject upwards of 80% of all loan applications they receive from small businesses! Alternative financing offers not only the benefit of a higher likelihood of receiving the money you ask for, but turnaround times are often shorter than with bank financing because the underwriting process is more streamlined.
What types of alternative financing are available?
There are a number of different types of alternative financing structures available. Some of the most popular include:
Asset Based Lenders lend money using assets of the company as collateral such as inventory, accounts receivable and equipment. They can also be used to fund the purchase of autos, trucks, equipment which leaves your traditional banking arrangement for working capital.
Online lenders who require far less paperwork than traditional banks and will often give you a decision instantly, with money made available within 1-2 business days. The drawback is that their interest rates tend to be significantly higher than bank loans.
Crowdfunding has taken off over the past few years and doesn’t appear to be going anywhere. This process allows individual backers to support a project with a donation of as little as $5. Specifics depend on which site you use (with Kickstarter and IndieGoGo being two of the most popular): Some require you to secure the full amount of money that you are asking for in order for your project to be funded while others will release to you whatever donations come in at the end of your campaign.
To learn more about alternative financing and the benefits it can offer your business, listen to our podcast episode where we spoke with Allan Levine of Madison Capital.
Ready for your AHA! Moment? Call Allan Hirsh Advisors today!
At Allan Hirsh Advisors, we believe in making a difference in the lives of CEOs and Business owners. We help you understand your vision – both personal and professional, discover why you are in business, work with your visions to align them with your “why”, and give you feedback on what is important and hold you accountable for your decisions. All this so you can improve your life and improve the lives of the people around you. If you are interesting in taking your business to the next level then contact Allan Hirsh Advisors to learn how we can Create AHA! Moments for you.
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