Alternative business lenders have become much more popular over the past decade or so. But, compared to traditional lending institutions, companies like United Capital Source are still very much the new kids on the block. When the average person envisions taking out a small business loan, the requirements and terms that first come to mind are those associated with bank loans. They might be aware of some online business lenders, but mostly because they offer a single, straightforward product with straightforward requirements. Other alternative business lenders aren’t as well-known, so it’s only natural for potential borrowers to have plenty of questions.
In addition to general unfamiliarity, much of these questions likely stem from how much easier it is to obtain a small business loan from an alternative business lender than it is from a bank. Here are the answers to 3 common and understandable questions people have about alternative business financing:
1. Your business still has to be in pretty good shape, right?
It’s true that your cash flow, business credit, and revenue don’t have to be perfect in order to be approved. There’s simply too many reasons why a completely responsible business can run into financial trouble. Unforeseen expenses arise, business partners make mistakes, atypical weather lasts longer than usual. Your cash flow does, however, have to be considered healthy. Before approval can be granted, a potential client might have to make some moves to improve in one of the three aforementioned areas.
But here’s a big difference between our cash flow requirements and the cash flow requirements of traditional business lenders. The improvements we might suggest you to make can be done completely on your own. You don’t necessarily need more money to fit our cash flow requirements. Yes, you might have to get your hands dirty for a little while. More money won’t make certain problems instantly disappear. Sometimes, the first steps to eliminating problems in these three areas is a good old hard work.
Not sure which steps to take? We are happy to help you figure that out. This greatly decreases the chances of you finding yourself in need of another small business loan for the same reason later on.
2. How are you able to work with so many businesses?
Your first business loan with United Capital Source might not be the loan of your dreams. But paying it back carries two major benefits: One, it will bring you significantly closer to accessing larger funding amounts and more convenient terms. The second benefit is much more important. Paying off debt without endangering cash flow is a skill that all business owners should possess. It’s not a privilege that should only be shared by wealthier businesses with flawless track records.
The earlier you learn, the more successful your business will be. This is why we frequently work with businesses that have only been open for just over 6 months, or have very little credit history. For businesses like this, their first business loan is designed to instill the basic fundamentals of debt financing. By the time they are ready for a second business loan, they won’t be risking a massive failure due to inexperience.
3. What about small business loans for covering expenses?
This is a confusing subject. You might have heard an alternative business lender say that you should “want,” not “need” a small business loan. But when you check the website, you discover that this business lender has indeed worked with businesses that were purely looking to cover regular business expenses. Didn’t you just read that the point of small business loans is not to keep your lights on? It’s true that companies like United Capital Source have helped many clients pay their bills during rough patches. But that was not the business loan’s sole purpose.
In addition to staying current on recurring expenses and preventing their credit scores from going down, the businesses that are approved for such business loans are trying to do at least one of two things. The first is putting the majority of their operational funding into some project or initiative that is projected to increase revenue. An auto repair shop might have to spend its operational funding on new parts for a series of jobs, or a retail store might be developing a new product line. The second is maintaining a relationship with essential business partners, like buyers or suppliers.
When a business is just starting out, it doesn’t have the resources to work with the best people. The opportunity to work with and keep better business partners should therefore not be put into question. With some partnerships, failing to make payments in approximately the same time frame inhibits business partner’s operation, especially during a slow period, when your competitors are likely struggling to make timely payments as well.
Logic, meet the business lending industry
Until alternative business financing becomes more of a household name, the business lending industry will likely maintain its negative reputation. This reputation stems from traditional business loans that, between the application and repayment process, seemed to do more harm than good. So, if you’re still wondering what makes companies like UCS so different from traditional business lenders, the answer can be summed up in just two words: common sense.