There’s a reason that new industries make a name for themselves, and it is usually because there was a big need for it. It’s basically why alternative lenders have become all the rage for many small business owners these days. Essentially, the alternative lending industry is filling a gap left by risk-averse, commercial banks. By embracing computer technology to make lending more profitable and efficient, it has opened up opportunities galore for small businesses. It is estimated that banks are now only approving 50 percent of loan applications. If you’re a woman, unfortunately, according to the research, only 15 to 20 percent are getting approved. But when it comes to alternative lending, these companies don’t discriminate. Here are two popular alternative financing tools that you may want to consider to help you with your new woman-owned business.
A Revolving, Business Line of Credit: Always Available When You Need It
A revolving, business line of credit is an open-ended, flexible loan arrangement. In some ways, it’s similar to a credit card. For instance, though you are given a set amount, you can take out however much you need with the rest remaining in the account when and if it’s needed. The beauty of a line of credit is that you’re not charged interest until it’s actually used. The payments are typically more irregular compared to the set repayment schedule of a conventional loan.
Receivables Financing: No Collateral or Shaky Credit is Usually A-Okay
Receivables financing is an alternative financing arrangement in which a business uses its accounts receivables, which is money that customers owe, often in 30 or 90-day billing cycles, as collateral. The business generally receives an amount that is equal to a reduced value of the receivables that are pledged. The age of the receivables typically plays a large role on the amount of money a small business will receive. The older the receivables are, for instance, the less the company can expect.
Also called factoring, this kind of financing tool can assist small businesses greatly in freeing up capital that is tied-up in receivables. It also transfers the risk of default associated with outstanding customer accounts to the financing institution. This transfer of risk can assist a business in shifting its focus from trying to collect to more pertinent tasks.
If you want more information on alternative financing, research alternative lending services online. They are known for being quick, easy and the practical choice in today’s digital age.