For small businesses, every dollar counts! This is why all entrepreneurs are so careful about signing up on financing deals – a good rate can result in substantial savings, whereas a bad one can impact the long-term health of the company.
While banks might offer stable and competitive financing deals, they are virtually inaccessible for small businesses, especially if the business has a poor credit rating or a shaky financial history. Their business model and risk-averse corporate mindset make them favor larger and more stable companies, leaving small businesses frozen out of the credit market.
But, the last decade has seen the alternative financing industry ride to the rescue of the small business community – offering flexible, fair, and fast funding to SMEs across America.
However, the alternative lending industry in the US is HUGE – the total transaction value in the sector amounts to US$32,539.0m in 2019 – spread over 1,687 thousand customers. The industry is split across thousands of companies offering a vast range of financing deals. To find the best deal amongst the various alt-lenders, you must keep some things in mind –
Starting point – the search begins with you! You must first arrive at a clear idea of your requirements before you start approaching alt-lender.
Find the most reputable lender – ask around in the market to find trustworthy, long-standing companies in the alt-lending ecosystem. You want a lender who offers not only the cheapest terms but also someone who will support you through the process, provide excellent customer services and can be counted on to help in times of stress. A good example of this is the New York-based Mantis Funding, which has excellent online Mantis Funding reviews and word-of-mouth reputation.
Find funding options that suit your situation – different lenders have different offers, which means, for example, that the terms of a merchant cash advance with one lender could be different from another. The only way to find a suitable offer is to check with the reputable companies on your list. You must also remember to check the terms and rates attached to each offer.
Finding the right-fit offer ensures you only stay in debt for a minimum period of time – thus reducing the financial burden of repayment costs on your business.
Find out what is needed to complete the formalities – do you need to provide collateral, do you need a specific minimum credit score or transaction history? Which documents are mandatory? All these questions are vital to get the complete picture. A lender might advertise a smaller APR, but this might not apply to the type of funding you need, or it might have some particular condition attached to it.
Understanding ALL the details will ensure you don’t waste time applying to lenders whose final offering ends up being more expensive than what you originally planned for.
Check for predatory practices – do read the fine print to weed out malicious players. Some of these would try to trick you with undeclared fees, use balloon payments to make loan rates look smaller, or ask for extra charges at the last moment.
Look for signs in online reviews as these are a good judge of a company’s reputation. For example, Mantis Funding reviews paint a fair picture of the company’s reputation across all online forums. This is impossible to fake!
Negotiate – Always negotiate hard! Many alt-lenders, once they have approved you, will want to bring in a reputable new client. And many are willing to offer more comfortable terms to keep your business.
Even a little bit of relaxation in repayment costs or timelines can make a big difference for a small business. So, do give it a shot!
The Bottom Line: The fact is that even in the alternate financing sector, better credit history and strong financials will result in a better rate. BUT, lower rates are still possible without good FICO scores or collaterals. You just have to look harder and bargain smarter.