What Makes Alternative Financing Options Great For SMEs?

Most of the time, you’re responsible for funding everything in your small to medium enterprise (SME), including staying liquid throughout all your operations. When there’s a crisis or an unexpected expense that you need to pay, you may want to consider your options for faster funding alternatives. Banks simply won’t be your best choice when it comes to getting working capital loans as fast as possible. If you’ve been turned down or delayed by banks in the past, you might consider going for alternative financing options moving forward.

Alternative financing is a growing funding trend helping SMEs obtain suitable funding without the hassle of dealing with the big banks. It’s often easier than going for traditional loan options, such as credit cards, overdrafts and property-secured business loans. Here are the reasons why alternative financing options are usually great for SMEs.

There are More Opportunities for SMEs

Many SME owners are still getting their business established and pursuing rapid growth. If you’re one of them, your business is best served if you can acquire adequate access to working capital loans. Alternative financing provides access to funds in many different ways. 

Alternative finance can be sourced from many types of facilities, including invoice finance, merchant cash advances, non-bank loan and equipment finance. Invoice finance is unique in that lenders pay your (unpaid) invoices in advance to keep your business going when you need a hand, or to fuel current growth opportunities. 

There are also experimental platforms such as Bitbond which focuses on providing loans to online businesses and sellers using Bitcoin. They keep their transaction fees low and secure with the help of blockchain technology. These unconventional options lessen your risk of being trapped in late payments and bad debts as long as they are used appropriately and in line with your SMEs goals.

More Freedom

Generally, you get a lot more freedom with your decisions. Alternative financing lenders won’t inspect your SME too much, unlike the banks. They won’t be asking for a massive backlog of financial accounts and figures. Traditional loans usually require a range of strict criteria to be met, including a solid credit score. You’ll also usually need to explain how you plan to utilise the funds received. Along with your financial accounts (and any required security), if any of this information is not up to par, you’ll probably not qualify.

Each alternative financier’s requirements are different; however, if your credit score is on the low side, there is probably still an alternative option out there for you. Keep in mind that going for alternative financing options often make you fully responsible as a business owner. You are accountable for how you spend the funds you acquire from your choice’s financing solution.

Efficient Cash Flow Solutions

Alternative finance options are designed to plug any temporary cash flow holes you may be dealing with. It’s perfect for paying unexpected expenses in a timely manner. Alternative financing lenders usually provide funds to SMEs within 48 hours, assuming everything is in order. It’s a lot faster compared to bank loans that may take several weeks or months to process. The majority of alternative lenders are significantly more flexible. They’re willing to consider lending to smaller businesses as long as they have consistent revenues and show they’re able to make their payments on time.

Collateral May Not be Needed

Collateral is any asset or property of a borrower that serves as a backup in exchange for the loan. If the borrower fails to repay the debt, the asset gets taken or liquidated in return. Many alternative financing options, such as crowdfunding and unsecured business loans, don’t need collateral. You won’t feel the pressure to put your home or car at stake when applying for these working capital loans. There’s less risk in your part. This makes you focus more on your operations and less on the fear of losing your assets. Just make sure you understand the cost – since these loans are not secured. 

Fast Funding, Approval and Flexible Repayments

Alternative financing like invoice finance or debtor finance gives you a quicker route, especially when your business is undergoing good growth and is struggling with working capital as clients are taking 30-60+ days to pay for the goods and services you provide. They are great options, and you can often get funds within 24 hours once your invoices are approved! Payments are often more flexible too. Invoice finance acts as a revolving line of credit. You only pay for what you use, and you’re able to draw down against new invoices as you issue them. It’s not limited by a specific time period or repayment schedule, nor the bottom line profitability of your business.

Other options, such as a merchant cash advance, don’t even require you to make set payments at all. Instead, your lender simply takes a certain percentage of the money you earned through credit card transactions each day. Consequently, there isn’t a set date you must repay the loan by. Effectively what this means, is that, if you have a slow month, your repayment amount would be reduced to less than you would pay during a high sales month.

Whatever your situation, OptiPay is here to help you get the funds your SME needs quick, to keep your operations moving when you’re planning to scale your business or when you’re in a pinch. Get the cash you need and make OptiPay your partner for business growth today.

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