Borrowing money is an integral part of establishing businesses. Even the seemingly successful businesses might’ve experienced seeking financial assistance from bank loans.
However, if you’re in the same situation, you might need to reconsider your options. Particularly, bank loans might not be the ideal option if you’re aiming to support your expenditures.
To help you out, listed below are some dependable alternatives you may utilize aside from bank loans.
1. Credit Union Loans
While the practice of borrowing money from bank loans has been one of the most prevailing practices in the business industry, there’s no denying the negative impacts that it may cause you. Particularly, banks tend to implement stricter lending rules for small businesses. To save yourself from such hassle, you might want to consider applying for credit union loans.
Such loans can be a beneficial alternative if you’re looking for another option aside from filing for a personal loan from a bank. One of the many good things about credit union loans is that they’re non-profit financial institutions, which seek to provide financial assistance to their member with the lowest possible interest rates. Due to the nature of the institution, you may have higher chances of getting approved for your loans from a credit union loan.
2. Business Lines Of Credit (LOC)
Generally, a line of credit (LOC) is a type of business loan that most business owners can utilize in cases of financial constraints.
When applying for a LOC, you must first remember that its transactions can either be secured or unsecured. The difference between the two relies on the requirements for collateral.
In a secured LOC, you’ll be required to provide some collateral. On the other hand, an unsecured loan won’t require any collateral from you. What’s good about this alternative is that it frees up your payments, should there be a need for it.
Apart from that, LOC loans may also offer lenient regulations to business owners as long as they’ll be able to pay for their debt in a reasonable period. Unlike other bank loans, which are known to implement stricter rules and regulations regarding application for loans, this alternative can significantly reduce some stress upon your loan applications.
3. Peer-To-Peer Lending
Besides trying to apply for loans from credit union loans and business line of credit, another efficient alternative you can select aside from bank loans is peer-to-peer lending. Commonly known as crowdlending or social lending, this type of alternative makes for a unique method of financing strategy that allows individuals to borrow and lend money from each other, without a third party involved.
Similarly, the notable characteristic of social lending that makes it unique involves its lending policy that enables lenders to perform lending processes with each other without the involvement of any institutional mediator, including banks or brokers.
However, you must also know that this alternative mainly removes the mediator from the picture, which also makes it require more effort and time from both parties, as well as posing more risks than going to an official financial institution.
When it comes to engaging in peer-to-peer lending, you may experience closing financing transactions with individual investors who are willing enough to lend their money for agreed terms and interest rates. You may also utilize several peer-to-peer platforms for better evaluation of potential lenders.
4. Financing Companies
Financing companies are also ideal alternatives for bank loans. Commonly known as finance firms, these financial institutions administer dedication to extend the financing for those in need.
However, these institutions mainly differ from banks and credit union loans in their policy of not accepting deposits. Along with these deposits are financial products and services, which may include cards, credits, and safety deposit boxes.
Such institutions ensure fair evaluation and approval of loans created by individuals or business owners. Apart from that, they also provide loans to support clients in purchasing services, goods, cars, major appliances, furniture, and equipment.
5. Working Capital Loans
Aside from fast cash loans, another efficient alternative for bank loans may include working capital loans. Such loans are primarily utilized to fund a company’s fundamental business operations. While working capital loans might not be a specific type of loan, they’re still popular in the business industry.
Moreover, working capital loans are mainly focused on assisting small business owners to achieve their companies’ short-term operational goals. They’re also mainly focused on utilizing several other forms of financing, including term loans, invoice financing, and lines of credit (LOC), which are all necessary parts of the financing processes.
There’s nothing wrong with borrowing money. However, if such an alternative won’t be able to do you good or offer any positive impact on your business, then you might need to reconsider your decisions.
Fortunately, there are various financing alternatives you can choose from aside from bank loans. Some of these alternatives may include credit union loans, business lines of credit, peer-to-peer lending, financial companies, and working capital loans.
Through these alternatives, borrowing money has been made easier and hassle-free.