You may have seen or heard advertisements from firms suggesting you try their company if you are “fed up” with trying to borrow money for your small business from banks. Watching a football game recently I saw an ad that threw around numbers like “loans from $50,000 to $10 Million” and phrases like “our simplified application procedures” etc. In the library I’ve been asked more than once whether these companies are legitimate. I can’t answer a simple yes or no for all companies but broadly the answer is that many of them are very legit. These businesses comprise an industry that has come to be known as alternative lending and they are playing an increasingly large roll in the business funding arena. The trick is in knowing how they work and knowing whether they area appropriate for you.
As a rule, none of these firms is going to loan you money to start a business. Alternative lenders are interested in lending to existing small businesses that can demonstrate positive cash flow. A loan Broker--Ami Kassar--who writes for the New York Times Small Business Blog said
These lenders are extremely entrepreneurial and are leaving the banks behind with their speed and use of technology. Many are backed by premier investment banks and Silicon Valley venture capital powerhouses — investors who understand that entrepreneurs and small-business owners are throwing up their hands in frustration over how long it can take to get a loan from a bank, especially if the loan is backed by the S.B.A. More and more businesses are willing to pay the price of the alternative lenders just to be able to get their capital and move on.
That price can be pretty high though, and in some cases an alternative lender might want access to your bank accounts to take their loan payments out automatically on a regular—perhaps even daily—basis. Here are some links if you’d like to learn more: