In an article from business.com we found a good summation of some of the important factors that an Alternative Lender will look at, which will affect the size of your loan, the rate you pay and obviously your odds of being approved.
For many Alt Lenders, Credit Score is the first and last thing they look. These lenders make small business loans based entirely on the owner’s credit score. This model can be a very quick and easy way to secure funding for your business but the downside is these typically carry high interest rates with prepay penalties and daily or weekly withdrawls that can put a real strain on your working capital down the road. These are typically quick fixes and should not be used for long term financing.
A full underwriting of your company will be done by Alternative Lenders that are looking to finance your business based on the credit merits of the product or service and not just the owner. These lenders will typically use the credit score as well but this is only for the purpose of evaluating the value of the Personal Guarantee that will usually come with the loan. Time in Business is an important factor since many companies fail within the first couple of years, a lender will see that you have been able to stay in business past that threshold and find comfort that you will be around to pay them back.
Monthly revenue is also important because you need to have the funds coming in down the road to service the debt and make your payments. It seems obvious but many companies don’t plan far enough down the road to be able to plan for the payments to a lender on top of their existing and continuing costs. A lender will definitely make this determination by looking holistically at your revenue and planning ahead to be sure that you can pay them back.
Collateral is the most important part of a loan for many Alternative Lenders. A company that has large amounts of AR or equipment that can be used to recover any debts that go unpaid have a very high likelihood of being approved. This collateral ought to be free and clear of any other encumbrances and so the lender will also want to know what other debt you have and what is being used to secure other obligations.
This summary is meant to be a quick top-line of what you can expect to need to be able to explain when applying for a loan from an alternative lender. Every lender will have different requirements based on their lending model.
About Payplant
Payplant provides growth financing for entrepreneurs, by entrepreneurs. Its Pay Me NowTM digital invoice-financing service provides cash to businesses when their customers pay too slowly. Payplant helps businesses with PO and Invoice Financing, Asset Based Lending, Term Loans and Customer Financing products. Payplant works with companies that don’t currently qualify for traditional bank financing, have grown too quickly for their current lender or are at the point in their evolution where an influx of working capital can elevate their business to achieve rapid growth. Payplant delivers fast and reliable funding, at very attractive rates and is completely on demand. For more information, visit www.payplant.com.
Login
Business
App Developer
Illinois State Vendor