If you have tried to obtain small business financing from a traditional bank in the last few months or even years, you have likely noticed that things have changed. While it has always been a challenge to receive a small business loan, once the recession hit, it became even more difficult. The economy may finally be on the mend, but in terms of small business financing availability, the world is still a different place. In light of the economic crisis, many lenders responded by tightening their lending standards. Banks may have become less willing to grant loans, but that did not mean that the demand for loans declined. In response, entrepreneurs were driven to search for alternative sources of financing. That drive toward alternative sources of funding is now propelling the future of small business financing.
In many ways, the move toward alternative small business financing has proven to be a boon to small business owners who frequently found that traditional loans did not meet their needs. While most such bank loans were designed for large capital needs, when a business owner needed a small loan, they often found that they were out of luck. Alternative business loans have resolved this situation nicely by providing not only easier access to capital but also smaller lending availability that better suits the need for short-term loans.
Alternative lending options have also provided improved flexibility in terms of lending for business owners. Rather than being restricted to lending made available for only specific purchases, business owners are now able to take advantage of alternative lending to fund areas where they need capital the most, such as hiring new employees, paying off debt or implementing advertising campaigns. With fewer restrictions in place, business owners are better able to funnel capital into areas that will help them to resolve unique business challenges.
Moving forward, it seems unlikely that there will be a return to traditional bank loans serving as the predominant source of funding for entrepreneurs and business owners. In fact, as more business owners continue to take advantage of new lending opportunities, it is more likely that alternative lending will become the new standard.
Since the onset of the recession, the financial industry has changed. Many of those changes may have been unwelcome, but from those changes have arisen new opportunities to help business owners grow their businesses on their own terms.