Most business owners at some point need working capital to get over a slump, cover unforeseen costs or expand their business. When considering non-bank options, many prospects call us with preconceived notions of how the process works. Here are common misconceptions our funding team hears daily:
Misconception #1 – Terms and conditions are the same as banks
When clients consider alternative lending, they still think they are dealing with long term commitments.
Reality: Alternative lending is typically structured to get you all the way through the repayment process in a mere 6 to12 months.
Misconception #2 – Assets/collateral are needed
Callers think that when they apply for funds, its asset based. They dread having to pledge an asset to get the funds they need.
Reality: Very few alternative lenders collateralize with hard assets. This actually works to the benefit of the business owner because we don’t hold the asset hostage until you pay off the balance, unlike traditional banks.
Misconception #3 – It’s a long application process requiring tons of paperwork
Many potential clients believe we need just as much information as the banks do in order to apply for funds, and that it will take just as much time to approve and dispense the funds (typically weeks or months).
Reality: The application process is minimal in both time and paper work. We typically require 6 months of business bank statements, one year of a business tax return, and a one-page application. Funds can be distributed in a matter of hours. Plus, our clients experience an approval rate of roughly 70%. Banks approve less than 30% of business loan applications.
Misconception #4 – Subsequent funding
When clients borrow from a bank a second time, they may need to complete another lengthy loan process again.
Reality: Reliant’s clients not only have a short process for subsequent funding but those in good standing can usually access more funds over longer terms once they’re past the midway point of their original program.
Misconception #5 – Having bad credit won’t get you approved
Many make the assumption that their low credit standing will affect eligibility for approval.
Reality: Don’t be afraid to apply. 70 percent of the applications we look at are approved despite credit standing.
While banks place a strong emphasis on credit score, it’s only one of many factors considered by alternative lenders. Your company’s ability to repay funds, and general stability are also important.