What exactly is considered an alternative business loan? It is any loan provided through an entity other than a bank and or credit union. Private individuals, who may call themselves a “bank”, that take on the risk and hard work of determining whether or not a business and business owner are worthy of their money and whether or not they will pay it back….with a whole lot of interest. Yes, alternative business loans are very expensive.
Consider for a second what a business owner is actually getting. Ten’s of thousands of dollars from someone they never met that is advancing funds based on a few bank statements and documents in less than 10 days who has no equity in your business.
What to Expect From An Alternative Revenue Based Business Loan
The process, believe it or not, should start with going to your bank first. See if you can get a loan from your bank as that will always be the best deal possible. There are several factors though involved with getting a bank loan that you have to consider. You have to have great personal credit, you have to be willing to wait 30-90 days to get your money, you have to provide a ton of paper work and documentation, you have to be requesting at least $50,000 (anything less and it isn’t worth the banks time). Once this is all behind you and you’ve exhausted friends and family money you should turn to an alternative lender. A Google, Yahoo, or Bing search for “fast business loans” or “merchant advance” will yield plenty of choices. These will be direct alternative lenders and brokers. I would suggest using a broker only because it will be a single point of contact; one application and one place to send your documents. The broker will know which lender or lenders will best suit your needs and save you a lot of precious time. The documents you will need are pretty simple. 6 months of your most recent business bank statements, 4 months of your most recent merchant processing statements (if you accept credit cards), a voided check, driver’s license, proof of ownership, and sometimes a tax return. Really not much at all. Now the best part….within 24-48 hours you will have a lending decision. At that point you will be given your options and you make a decision and a contract is sent to you for signature. Within 3 days you will have your funding.
Rates, Terms, and Charges For Alternative Revenue Based Business Loans
Expect the following from alternative revenue based business loans as far as rates go; 15%-45%. That is the cost of the money. Terms will range from as little as 2 months to 18 months but the average will be 5 months. So if you’re borrowing $10,000 you would payback $13500 (35% money) within 5 months. The money is debited weekdays daily. These are very short term loans. Additional charges are origination fees/ACH fees that can range from a few $100’s to 2% of the loan value.