The Basic Qualification Differences Between Traditional And Alternative Funding

In the last decade or so, alternative financing has become a new method for SMEs to get funded. What’s intriguing is that this industry has seen an exponential rise and, to a certain extent, is also responsible for strengthening the backbone of the country’s economy- small and medium enterprises.

However, no one predicted this coming, especially 10 years ago. Before this industry came into existence, businessmen had to visit banks and credit unions to receive funds for their small needs. Howbeit, this scenario changed when the industry had to face turbulence created by the recession. Post-recession, the financing sector became rigid and became a bit apprehensive. This reflected in their reluctance to provide funds to SMEs.

This became a prominent reason why alt-financing gained major attention. And, it could not have been more different from the traditional channel. On the one hand, traditional channels have made a red tape and paperwork an important part of the procedure, whereas, on the other hand, these non-traditional streamlined and automated their procedures. This little step has made them time-saver and a businessman’s go-to option.

Nevertheless, these two options vastly differ from each other, apart from the aforementioned fact. Let’s delve into that:

Formalities: Banks do have extensive paperwork, even in today’s online scenario. What’s more, is that they ask for 2-3 years of transactional history with the client’s tax returns.

Meanwhile, with alternative lenders, a businessman only needs to provide their bank statements for the past few months so that they can verify their transaction history.

Monetary Deposits/Collaterals and Credit Score: Banks always ask for monetary deposits when a businessman is seeking funds for a large investment. However, the same does not go with alternative funding firms like Mantis Funding. These firms have not made assets their criteria for providing funds. They deal with unsecured funding and provide funds to businesses without asking for collaterals.

Apart from collaterals, Mantis Funding reviews applications based on their transactions instead of their credit score. They review their personal data to understand the cash flow and provide funds accordingly, which is not the case with the traditional financers.

History of profitability: No matter how compelling the idea is, banks will only fund a venture if the businessmen are able to show the established profitability of 2 or more years. Meanwhile, alt-financing firms like Mantis Funding understand the situations of SMEs and realize the financial disturbance they face in the market and consider the stories of their clients with a holistic assessment of their application to provide approval accordingly.

Traditional financers lack this kind of personal touch and are more focused on reducing their risk. Due to this, they tend to miss out on opportunities to help a small and medium cap enterprise. However, firms like Mantis Funding look for such opportunities and are ever-ready to help the SMEs. Besides, they understand the client’s need for quick funds and work to provide funds within 3-4 days of application approval.