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Why should you consider alternative business loans?

Wondering what business loan is right for you? Find out the benefits of alternative business loans.

Having your own business can be a dream come true, but the biggest obstacle in the way of realising this dream tends to be financing. Most of us don’t have the kind of capital needed for a startup. This leads to many people going to the bank when it’s not always the best option.

There are numerous alternative financing options available, and deciding on which one to go with is not a choice that should be made in a rush. There’s no need to be apprehensive of alternative financing methods, and there has actually been a worldwide increase in alternative financing. According to a survey done in May 2016,non-bank business lenders have received more than $1.1 billion worth of loan applications every month, representing approximately 11,676 loan applications per month.

Compare a range of business loans

Rates last updated October 18th, 2017
Table Image Min Loan Amount Max. Loan Amount Loan Term Application Fee Product Description
Prospa Business Loan Prospa Business Loan $5,000 $250,000 0.25 to 1 years $0 Apply for a business loan from $5,000 and enjoy a shorter loan term up to 12 months. Note: Financial statements required on loans over $50,000. Go to site More
Spotcap Loans Spotcap Loans $10,000 $250,000 1 year $0 Take advantage of a fixed interest rate and no upfront fees on this business loan, available up to $250,000. Note: Business must have been operating for at least 18 months and have turnover over $200,000. Go to site More
Moula Business Loan Moula Business Loan $5,000 $250,000 0.5 to 1 years $0 Small business loans of up $250,000 approved and funded within 24 hours. Transparent fees and rates. Note: Business must have been operating for at least 12 months and have monthly sales of at least $5,000. Go to site More
Sail Unsecured Business Loan Sail Unsecured Business Loan $5,000 $100,000 1 year 2.5% origination fee Take advantage of a convenient business loan available from $5,000. Bad credit applicants considered. Note: Business must have been operating for at least 6 months and have turnover over $50,000. Go to site More
RateSetter Business Loan RateSetter Business Loan $10,000 $150,000 0.5 to 5 years 0.5% Apply for up to $150,000 and choose between a secured or unsecured loan. Note: Business must have been operating for at least 2 years and have turnover over $250,000. Go to site More
GetCapital Flexible Business Loan GetCapital Flexible Business Loan $5,000 $500,000 0.25 to 1 years Upfront fee of 1% A business line of credit that allows you to earn Qantas Aquire Points. Note: Business must have been operating for at least 9 months and have monthly sales of at least $10,000. Go to site More

What are alternative business loans?

Alternative business loans are a form of financing that is not provided by traditional lenders such as banks. Examples of these include private lenders, pooled investment schemes, wholesale funders, peer-to-peer, online, subscription-based loan funds, contributory loans and more. Each of these is slightly different in terms of the loan solutions they offer and, as with traditional business loans, should be thoroughly researched before choosing.

What are the advantages of alternative business loans?

  • Easier and quicker application process. Alternative business finance providers tend to have less red tape than traditional lenders. This can mean shorter processing times, quicker funding of loans and no credit history checks.
  • No regular audits. Monthly or quarterly audits can cost up to $5,000. The fact that you will most likely not have to add that expense to your budget is a massive help in any small venture.
  • Closer relationships and more flexible credit limits. Alternative lenders tend to have fewer clients than a bank does. This gives them the freedom to get to know their clients and their businesses properly, which will lead to more flexible terms.
  • Bad credit history can be accepted. It’s possible to get a business loan with bad credit from some alternative finance providers. Your personal and business credit history may still be checked but your business’s financial situation will be used to determine your eligibility.
  • Quick turnaround. Fewer clients leads to quicker service. While you may need to wait a few weeks when applying with a bank, an alternative lender may be able to approve and fund your business loan in one business day.

How to compare different lenders

When comparing different lending options, take note of the following:

  • Monthly repayments

    • This is extremely important for cashflow purposes.
    • These usually include the monthly charges, so make sure to measure these against other offers separately.
  • Interest

    • You want to sign with the provider that levies the least interest.
    • If you have international trades, keep caps and floors in mind.
  • Loan terms

    • You need to ensure that you are given sufficient time to get your business running at a profit as to be able to afford the repayments.
  • Balloon or monthly payments

    • This will be dependent on the type of business you run. If you expect a big influx of capital in the future, it will be in your best interest to use a chunk of that to cover your debts, therefore, a balloon payment option might be best for you.
    • If you make a steady income, you should opt for monthly payments so as to not run into a cash flow problem in the future.
  • Minimum criteria

    • How long the business has been operational
    • The minimum amount of monthly sales
    • The purpose of the business, for example, profit or nonprofit
  • Time

    • Some loan providers guarantee approval and fund transfer (or non-approval) within a set amount of time. This will be an important consideration if you are in need of immediate capital.
  • Rewards offered

    • If the lenders you consider partner with other institutions, there may be rewards involved.

Examples of popular online small lenders in Australia include Spotcap, GetCapital, Capify, Prospa, Moula and OnDeck. These lenders are deemed trustworthy and reliable, and you can compare more business loan providers here.

How can you apply for an alternative business loan?

For most of the above mentioned online lenders, the application process is simple:

  • Register and enter basic personal and business information
  • Connect your business’s bank account
  • Connect your accounting software or upload your financial documents

The modern economy throws a lot of loan options at you, and every now and then it may be overwhelming. Make sure you compare all of your options so that you find the right one for you.

Picture: Shutterstock

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