Best Alternative to Small Business Loans in 2018

Best Alternative to Small Business
Loans in 2018
We all know that business loans from banks and NBFCs are the best and easiest
way to finance once business. But there some small and medium companies
who are not able to get a business loan approved, it may be due to lack of
infrastructure, cash flow or because of a good business plan. This is a very
tough situation for any businessman. It is even possible with a company with
solid cash flow and good infrastructure gets rejected for a business loan, or there
may be a case where the money borrowed from the business loan is not
sufficient for their business plan.

What is an Alternative Loan?
An alternative business loan is a form of business financing. But it is not
provided by a bank or a NBFC. Most of the alternative business lenders are
online business lenders who offer loans to businessmen for their business. The
amount of loan which they offer is smaller as compared to the traditional
lenders. The tenure is also for short-term and with higher interest rates than
traditional business lenders. But the benefits of alternative loans is that it can be
availed with lower credit and cash-flow also, which is not possible with
traditional bank lenders. Even the documents required for funding the business
is comparatively less. Alternative loans have offered many companies and small
businesses, the ability to obtain business funding when a bank loan isn’t
available.
Alternative lending is one of the major force over the past few years and as a
result of this, small and medium enterprises and businesses who were not able
to qualify for a bank loan, are now able to fulfill the capital needs of their
business.
Another plus point with alternative loans is businesses looking for cash for
urgent requirements also had to wait for weeks or a month to get their business
loan approved with the traditional system, but with an alternative loan, one can
get the money even on the same day.
While the alternative loan became so famous and flexible, there are even many
business owners who are unaware of this kind of loan.
Benefits of Alternate Business Loans
Benefits of alternative lenders include the following-
Less Paperwork: We all are aware of the fact that when one goes for a business
loan with any traditional lender such as a bank or NBFC he/she need to fulfil
the eligibility criteria to get the loan approved and sanctioned. And in terms to

satisfy the eligibility criteria the applicants need to provide so many documents
such as IT return forms, business plan, CIBIL and so no. But when it comes to
alternate lending these many documents are not required. Less documentation
and less paperwork make it easier for the people to avail it.
More Flexibility: Term loans, lines of credit, and business loans all these
offered by banks are great business financing options. But the availability of
alternative loan with more flexibility has made it even easier and comfortable
for the loan seekers. With an alternative business loan, an applicant can use a
piece of equipment, or even an outstanding invoice as a collateral.
There is also flexibility in the amount one borrow. Generally, it’s not
economical for the banks to grant a loan of less amount, but alternative lenders
a loan seeker can easily get a loan even of the small amount. Alternate business
lending with this flexibility provides a chance even to the small business to
grow.
Faster Funding: Alternative lending is much faster as compared to the
traditional lending.
Since the alternate lenders are not traditional banking institutions, hence they
aren’t affected much by the government’s regulations of big government
lending institutions. This is also because banks grant a loan using money from
the savings accounts, while the alternative lenders get money from other sources
like hedge funds, investors, lines of credit.
Fast Turnaround Time: With alternate lenders, applications are quick and
hence is their funding.
For the same loan, banks can take a few weeks and even longer to approve your
finances. Alternative lenders the decision is very fast and even the disbursal.
Though it may come with a bit higher interest rates still it is worth to go for
when you have less funding options available or when there is some urgent
requirement.

Cons of Alternative business loan
More Expensive: All though alternate business loans have so many benefits but
still it has some corns, the first one is it is more expensive than any other
business loan as the interest charged on alternate is a bit high as compared to the
other traditional business loans. So, if you go for a long tenure with an alternate
business loan it may cost you much. But generally, alternate business loans are
short tenure loans.
Shorter Terms & Smaller Loan Amounts: In addition to higher interest rates,
financing through alternative lenders generally comes with shorter tenure and
smaller loan amounts.
But this also depends on the kind of loan you want. Short tenure implies a
shorter repayment period and this implies more EMI amount.
Uses of Alternative Business Loans
Working capital
Business Extension and Expansion
Employee Payroll
Marketing/ Digital marketing
Hire employees
Pay taxes
Purchase Equipment and Inventories
Pay mortgage
Payments to the Clients