Small business owners have always had a difficult time financing their new ventures. Capital is necessary, and alternative lenders are becoming a more visible option for those struggling with more traditional qualifications. It’s important that business owners understand all of the implications prior to committing to any type of alternative lending option.
Understanding Alternative Lenders
In order to secure the type of financing that they need from banks many small businesses must meet a strict set of qualifications. Sometimes, these qualifications can be impossible for startups or businesses that don’t have a paper trail proving years of profitable transactions to meet. This can force them to seek out alternative lending options that can have higher interest rates and predatory collection methods. It’s important to weigh all of the pros and cons before making any decisions.
Problems with Alternative Lenders
Not all alternative lending options are bad, but many will take advantage of desperate businesses who may not have another financing route. The dangers of alternative lending can include everything from poorly written repayment agreements to interest rates that can more than double the amount eventually repaid. Always make sure that you fully understand the loan agreement before signing off on anything.
What to Consider Before Committing to a Financing Option
There are several things you can do to protect yourself before signing on that dotted line:
- Do Your Homework: Check out everything about a lender prior to doing business with them. Look at their financial reputation, reviews, and don’t be afraid to have an attorney look over the contract before agreeing to any repayment terms.
- Look for Partnerships: With a cohesive business plan, you may be able to attract investors or partners who can help with financing. Finding someone you trust to share the financial burden can be a great way to avoid lenders altogether.
- Compare Rates: A loan is a very serious financial relationship. Always compare interest rates and repayment terms from every available option before making a final decision.
Contact Vankeith Commercial Capital to explore your financing options. They can advise you on the best way to proceed for the type of business goals you have.