The term ‘startup’ has been used quite loosely to refer to all kinds of businesses that have just been established and began operations. Any talk of startups without reference to ‘Funding’ by venture capitalists (VCs) is incomplete and so the discussion veers into areas like ‘In 2020, VCs pumped in a whopping $156 billion into US based startups.’ As a small business owner looking for a small business funding of say, $20,000 you are surely not going to be able to configure where your business fits in the ‘whopping $156 billion of investment.’ For a VC, a startup is not a trucking, auto repair or restaurant business but what is known as a ‘tech startup’, which is ‘tech-enabled’ and is staffed by ‘techies.’ Let’s face it; that’s a different world altogether.
Enter funding for small businesses by alternative lenders
The tech startups are playing their role in advancing technological innovations and applications at the highest levels and are getting funded in billions. Now let’s look at another home truth – small businesses outside the ‘tech’ ambit account for over 44% of all US economic activity worth around $6 billion.
Intriguingly enough, this huge segment of the US economy is neglected by traditional lending agencies, not to speak of VCs, angel investors, crowd funders and others. Thankfully we now have alternative funding for small businesses on easy terms that are perfectly suited to meet the unique needs of small businesses.
Benefits that small businesses get with funding from alternative lenders
Whether you want to call these small businesses, startups or anything else, most of them are newly set up businesses founded recently by enthusiastic small entrepreneurs. They surely don’t meet the description of a startup for the VCs, angels or crowd funders but they do so for alternative lending agencies.
Funds are generally unsecured
The small US business funding agencies never ask for collateral to secure the loans they provide to small businesses. That’s a measure of the trust they show on these businesses that improves confidence and leads to better business practices.
Funds not linked to borrower’s equity
In alternative business funding, the lender never demands a slice of equity in the borrower’s company. It is straightforward debt financing and that too, with the specific aim of helping small brick and mortar businesses cope better with cash flow shortages.
Little to no credit history checks
Most small businesses have small credit requirements and they seek it only to meet urgent cash shortages. The alternative business funding agencies know that and generally overlook the borrowers’ credit history. They just see the profitability and the capacity of the business to pay back the loan with interest on time.
Quick and easy approvals and disbursal
Most small businesses don’t have the kind of fiscal discipline to anticipate a cash shortage well in advance. They apply for a loan on short notice and they need the funds in quick time. The alternative lenders respond to this with quick and easy approvals and disbursal of business capital loans to them.
Committed to fund small businesses
Alternative funding agencies have specifically arrived to fill the gap created by the apathy of traditional lenders toward funding small businesses. They not only provide fast and easy credit to the small businesses but also develop their credit offers on the basis of the unique requirements of these businesses.