Generally the hardest part of starting one’s own business is gaining the startup capital needed to get the ball rolling. This has never been more true in the United States since the economic recession in 2008.
After this financial crisis, many entrepreneurs saw a dramatic decrease in the flow of capital their businesses were able to sustain: both because of lack of business, with people less willing to spend money, and also because banks became less willing to lend money to help these small businesses.
Needless to say, the past four or so years have been the hardest since the Great Depression to operate and thrive as a small business in the U.S.
However, recently there has been a light at the end of this dark tunnel seen by many entrepreneurs. The light comes in the form of alternative lending companies such as CAN Capital, On Deck and DLJ Financial.
When new or old entrepreneurs need capital for their business, most generally venture to the bank to try to secure a loan. However, with banks becoming less willing to hand out loans to “risky” investments (small businesses), entrepreneurs are finding that these alternative lending companies are more willing to take risks by loaning them the much-needed capital that they desire.
There are a few big reasons as to why small business entrepreneurs should look to alternative lending companies rather than going to a traditional bank for money.
First, as mentioned briefly before, alternative lending companies are more willing to take risks on small businesses than traditional banks are. Because these are smaller lending companies, they are not as tied down by federal regulations and are therefore more willing and able to loan money to small businesses.
The second benefit to going to an alternative lender is that small businesses can receive money much quicker. If a company does get accepted by a bank to receive a loan, the process usually takes several weeks or even months to complete the transaction – but with alternative lenders, you can receive your loan in as little as two days. That is amazing.
Additionally, alternative lenders offer several forms of capital. Just a few of the loans available are term loans, factory loans, merchant cash advance loans and even machinery loans.
The final big benefit to seeking capital from an alternative lender is that they will give loans to entrepreneurs who have bad credit. When a person with bad credit tries to obtain a loan from a traditional bank, they will generally be immediately denied. However, alternative lenders have adapted and become much more innovative than traditional banks.
While banks simply look at credit history to determine loan worthiness, alternative lenders are looking at social network connections, real-time shipping performance and more.
I applaud CAN Capital, On Deck, DLJ Financial, and all the other alternative lending companies for taking the risk to invest their money and efforts to help small businesses around the United States succeed. Stealing the words of the great Cam Brady, small business owners are “this nation’s backbone.”
In a serious way, they affect our country’s economy both on a local and national level. These alternative lending companies are definitely a light at the end of the tunnel that was the financial crisis of 2008.
It’s companies like these that are making success a possibility for many entrepreneurs in our country once again.
Canden Cleveland is a junior at Oklahoma Christian University
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