Sometimes in life it’s better to go with the ‘alternative’ option. It could be an unconventional route to your dream career or simply a distinct taste in music, but for many of us the alternative seems like the right choice. When it comes to lending, alternative finance options are becoming mainstream thanks to big banks refusing funding to the majority of start-up businesses.
The conventional banking system simply isn’t working for most of us. Without alternative finance providers offering solutions such as peer-to-peer lending, crowdfunding and asset finance, most businesses wouldn’t be here today. These alternative finance specialists are plugging the gap the banks can’t fill, and giving a boost to the economy.
The problem with banks
Why is it so much harder to get a business loan from the high street these days? Financial crashes and economic uncertainty has led to most traditional banks being extremely cautious about lending. The terms on which businesses can secure credit from financial institutions are becoming increasingly unfavourable, so only the biggest and most established companies are approved. This creates a huge problem for start-ups and SMEs, who can’t get their businesses off the ground without a cash injection from the beginning.
In addition, lending from the big banks is also very expensive. The cost of borrowing – if you actually pass the application stage – could make it difficult to repay in the future.
Thankfully, if you’ve been rejected by traditional financial institutions then there is a way to beat the banks. There are now a wide range of funding sources to explore, allowing entrepreneurs to finance their great ideas. While the banks have been busy failing to give credit to small businesses, private investors and finance experts have seized the opportunity to offer alternative finance solutions. You can lend the same amount of money as you would from a bank using these different methods.
Peer to peer lending is basically borrowing money off individual investors rather than a financial institution. Crowdfunding usually involves a number of investors. This type of lending is suitable for all types of businesses and is much easier to secure than a bank loan.
If you have a fledgling business which needs expensive machinery or equipment in order to grow, asset finance could be the solution. It allows you to spread to upfront cost of the equipment over time, so you don’t need to worry about finding large amounts of money for necessary business assets.
Want to find out more about how businesses are beating the big banks? Take a look at Genie Lending’s case studies.