Most businesses have issues with cashflow as it never seems be that expenses need to be paid before you actually get paid. Unless you are a well established business and your income is predictable for years, banks can be a very fickle place to get help with this issue.
Personally, I like to deal with non-bank lenders as I find them much better to work with. In my family’s experience, asking a bank for a loan has always been an awkward experience so we tend to stay away from it. What I mean by awkward is that they want to know everything about you and the business history for many years. When I need Small Business Funding, I need it when I apply for it, not in 3 months from now and I do not want the bank to take a lien on every piece of machinery and acre of land we have when I only need funding to cover some Operating Expenses.
If I were looking to borrow money to buy more land, I would be willing to use that land as collateral, but if I only need a Short-term Business Loan, why would I be expected to tie up everything I own as collateral. To me, that is just tying my hands so I cannot work forward.
Alternative Cashflow Lenders will generally take the items involved in the transaction as collateral, and that is it.
What I mean by that is if you are looking for Cashflow Financing to cover short term Operational Expenses, Accounts Receivable Factoring or Accounts Receivable Financing as it is also called, the lender will take the Accounts Receivables as collateral. Generally speaking, they will not want to take a lien on everything you own – commercially and personally – like the banks will nearly always do.
Now I will say, that as far as interest is concerned, the alternative lenders do charge a bit more than a bank would but to me, the cost far outweighs the benefits of keeping your other assets available for leveraging if the need arises. To me, if I had everything tied up with the bank and then I needed to get additional funding for something and because of that I would need to go back to the bank, hat in hand, asking to have permission to do something with my own property – that is awkward to say the least!
Now I am not going to tell you which alternative lender to go to because everyone has their preferences but I will say that for me, I tend to return to the same lender each time the need arises as I can work with them seamlessly from where I am, I do not need to travel to the city for countless meetings which takes me away from what I should be doing. I like to do as much as I can over the internet and the Commercial Lenders on the internet allow me to get the funding I need with the least amount of inconvenience.
As always, if you have any comments or questions, feel free to message me.