Alternative Lenders Sometimes the Only Option for Today’s Small Biz Owner
Small businesses, still frustrated by banks’ tight lending policies more than three years after the Great Recession ended, are turning to a new crop of alternative lenders that are upending banks’ conservative standards and automating loan approvals.
Instead of stringently relying on collateral and credit scores, these cash-flow lenders are using software that reviews online sales, banking transactions and comments on social media sites, among hundreds of other criteria, to make loan decisions within minutes instead of weeks or months.
The loans sometimes come with hefty fees and can carry effective annual interest rates of 20 to 60 percent, whereas bank interest rates for similar loans average 4.5 to 6 percent. But, for many small firms, they have little choice.