Lending
Post Recession
We
are three years removed from the recession and still banks are tight
with their lending practices. If you ever had an idea that you want
to turn into a business, you would know how tough it is under this
credit crunch that still stiffens our economy.
Under
this current economic climate, a new breed of lenders are arising.
Online lenders are willing to assists startups, expanding and
fumbling companies with their capital needs are booming. These
lending institutions have been the solution of entrepreneurs who are
left with no other choice but to apply with them.
The
Rise of Online Lenders
Before
there were online lending companies, an entrepreneur would have to
suffer the consequence of being disapproved for a bank loan. He would
then be forced to use his credit card or using the equity for his
house. We all know how break neck a credit card’s interest could
be. Moreover, as for equity, well, let’s just say that it takes a
while. You see, when a person comes up with an idea, often that idea
needs to be turned into a business right away or else risk another
person beating you to it. Thus, if you’re going to rely on a home
equity to start a business, it takes too much that the demand that
you thought of supplying vanishes in thin air by the time you are
approved because you’re not the only person within a few miles who
has a brain capable of grabbing opportunities.
Speaking
of demand, this is how online lenders came to the picture. Just as
how Darwin’s theory of evolution explains things, they now exist to
fulfill the great demands of inventors, entrepreneurs and business
owners for quick lending options.
How
They Rate
Startups
and small businesses have little choice. They have very little room
for error when it comes to securing capital at certain points. That
is why even if you’re looking at a hefty annual interest rate of
20% up to 60%, business owners still bite the bait. Some may think
that it’s leaning on the extreme, especially if you remember that
banks only typically charge 4.5% to 6%.
There
are some though that only charges 2% up to 18% interest rates but the
firm would set a short payment period. Repayment would be from 30
days up to a year for firms that charges lesser interest rates for
small business loans.
There
is a growing trend with lending online firms on the use of software.
The past few years, online lending firms have relied on automatic
software to analyze all the requirements submitted to them by the
loan applicant such as sales, credit history, production information
and even customer interactions on social media. The software is able
to gauge the business of the loan applicant by those standards and
base the interest rate applicable to his loan if approved. However,
the final say will still be with the loan specialist if the loan
amount would be released or not.
Author
Bio:
John
Lewis is marketing lead at mybusinessloans.com.au. My business loans
is specialized professional lending company, provide business loans,
small
business finance. We
offer different types of business loans and help people who are
self-employed or small business owners.
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