In some ways, these are the best of times for small businesses. The economy in the most of the developed countries, i.e., U.S and China, as well as developing countries, likes of India, has proved to be resilient in the face of uncertainty in Asia and Europe. This economic growth has encouraged millions of entrepreneurs to try their hand at starting their own businesses. Doing so, helps the economy to continue to grow and further insulates the U.S. from shocks in other parts of the world.
According to a recent report by Bank of America (BoA), nearly 95 percent of today’s business owners built or acquired their companies. But don’t be confused by the source. Like other large banks, BoA does not care about helping you grow your small business. Ok, that is a bit unfair. The truth is they are not well equipped to service small businesses.
Sure you can easily set up a checking account, maybe even get a business credit card. But can you turn to them when you need a funding partner to help your small business grow? In most cases, the answer is No.
So who can small businesses turn to when they need a funding partner who understands their real needs? The answer has increasingly become the legion of ‘alternative’ finance companies that have come into the scene in recent years. These lenders provide flexible lending programs that are well-suited to the needs of small businesses.
In fact, alternative lending has become mainstream. None other than former Treasury Secretary Larry Summers believes these lenders will soon be the main source of funding for small businesses all over the country.
The rise of these lenders is actually a great leveller for small businesses across the country. In the past, a small business was effectively locked out of getting financing by banks. But that is changing. According to the Small Business Administration (SBA), nearly two-thirds of small businesses seek to finance from non-bank sources.
As such, small businesses today are better able to gain access to the funds they need to grow. Isn’t this part of running a successful small business? While the first couple of years is about survival. You want to be able to nurture your business so that it can become self-sustaining. A big part of the this is having enough capital to grow.
Now, this brings up a key point for any small business. Mainly the ability to engage with a funding partner who will help you grow. That is an investor who understands your needs, has flexible programs and can provide the funds you need fast. For a small business, agility may well be what saves you. So you should look for the same in a funding partner.
Imagine a large new customer calls you today and they want a price quote for 10,000 or 100,000,000 or 1 million units of your best product. Now imagine, if you had to go to your bank to ask for a working capital loan to actually make that order. By the time you receive approval from the bank, your shiny new customer would have probably gone to your competitor. As such, agility should also be something you look for when you engage a funding partner.
Another plus of working with an alternative lender is the limited risk. In many cases, the only collateral you will need is a personal guarantee. Compare that with a stodgy commercial bank. They will want you to mortgage your home, your kidneys, and even your first born child. Ok, they can’t really ask you for your kidney or your children, but I am sure they would if the government allowed it.
Furthermore, alternative lenders know how to work with people who have impaired credit. It could be missed or late payments maxed out credit cards, or even worse. These lenders understand that when you start out building your small business, you are likely to use every source of funding available to you. All too often that means using your personal credit cards to finance your business.
While alternative lenders will look beyond this. Maybe you should think about reaching to them before it ever gets that bad. After all, you sacrifice so much for your business. Should you have to sacrifice your personal credit score as well?
So if you have a small business in growth mode, or you are about to launch the enterprise of your dreams, engage with an alternative lender to find out more about the programs they have to help you grow.
