Trees eventually begin to grow on a barren, fire-scarred landscape. It may be a metaphorical stretch, but after the financial crisis of 2008, the financial landscape, particularly for small businesses and up-starts, was similar to a forest burned by wildfire. Sources of funding sizzled and burned; access to capital became scarce.
It was out of this disaster that new buds formed. Lenders existed who could take chances on small businesses; who saw the need for local, regional entrepreneurship to help pump new life into downtown U.S.A. "Online Lending is the New Normal," a headline on Credit Union Magazine reported, highlighting the trend from offline to online. Years ago to book a vacation, people visited their local travel agent. Now, a plethora of travel websites offer faster, more convenient, affordable options. We've seen the same shift for consumers and businesses seeking loans.
Today's online lending consumers are not only those with questionable credit, they are savvy decision makers who see the value in convenience and accessibility. Technology has allowed online lenders to process applications much faster, with less information and businesses walk away with cash, conveniently, and with a clear repayment schedule. It is a win-win relationship for both parties. Except when it's not.
Borrow What You Can Repay
There are still those predatory online lenders. Most often they are found in the payday loan sector of online lending, seeking individuals who are upside-down financially, looking to implement more fees, higher interest rates, sucking them into a cycle of borrowing. Those lenders give the industry a bad name.
Education and transparency, two factors that both government regulators and online lenders agree should be a basis for the industry, are essential--and exist--for a positive lending relationship. How to avoid a credit crisis when applying for funds?
- Pay attention to the business practices. Are you engaging in business with lenders who allow stacking, the practice of piling one loan on top of another?
- Consider if the lender is asking you enough questions. Yes, it's convenient to fill out a short application, but if they aren't checking deep enough into your ability to repay, they may not be out for your best interests.
- Are you asking for a reasonable amount? You, as a borrower, must take responsibility for the amount of money you are seeking. Have you done enough planning to ensure you'll be able to make the payment schedule?
- Is the repayment schedule clear? Have you researched your lenders and do you understand all fees, interest rates and payment expectations?
Alternative lenders want to see their products and services help further the economy through new business growth and entrepreneurial innovation. They gather at conferences like the recent LendIt U.S.A. conference in New York to share ideas, to meet with legislators who want to create a stable and confident borrowing landscape, to discuss policies and opportunities and technology to provide a better lending experience.
With the opportunities created by online lenders, in an industry legitimized by transparent practices, now can be the perfect time to expand upon your small businesses credit, without becoming a credit crisis.
Interested in learning more about alternative lending options to grow your small business? Talk to a professional today at Bizlender, who can help to partner with you to find the best solutions available for your business plans. Call 855-404-3070 today.