Page 30 - Wire Rope News & Sling Technology - April 2019

How to Land a Business Loan

from Nonbank Sources

By Phillip M. Perry
Alternative lenders may extend critical financing when commercial banks reject
a loan application. Before accepting money from nonbank platforms, though,
borrowers should perform due diligence, assessing each organization’s reputation
for fair dealing. The benefits of easy and quick money must be balanced against the
negatives of higher interest rates, costly service fees, and late payment penalties.

ome time for a business loan, tating toward the business of making based intermediaries matching bor-
whom do you turn to? Most like- larger loans,” states a recent story in rowers with pools of relatively small in-
Cly the corner banker who holds The Wall Street Journal. The prob- vestors. Others act more like brokers,
your checking account. That person lem’s worse if you are in one of a grow- matching loan applicants with a curat-
knows your enterprise best and has a ing number of small towns and rural ed group of larger direct lenders. What-
vested interest in its success. communities where banks are closing ever their internal dynamics, such or-
Even the friendliest local banker, profit-challenged branches. ganizations can toss lifelines when the
though, might respond to a loan re- Shut out of the money market, you need for money butts up against a con-
quest with a resounding “no.” Reason? might turn next to a loan sponsored servative lending environment.
The regulatory environment: The na- by the Small Business Administra- And that lifeline can be especially
tion’s financial meltdown a decade ago tion. But those can be just as elusive. welcome when a business has an urgent
sparked a network of tighter lending “An SBA loan is not a slam dunk,” says expense. “Nonbank lenders can usu-
rules that still hamper the Denise Beeson, a business consultant ally make loan decisions more quickly
flow of money. based in Santa Rosa, CA. (denisebee- than commercial banks,” says Marilyn
“Prior to the recession son.com). She points out that the lend- J. Holt, a Seattle-based consultant and
of 2008, conventional ers involved in such arrangements look author. Some loans can be granted in
lending was booming,” just as closely at an applicant’s credit 24 hours, while others might take only
says Parag Nevatia, and financial records. a week or a month — far speedier than
CEO of EZ Funding Solu- the typical waiting period of up to 90
tions, Metuchen, NJ (ez- Enter The Nonbanks days required by traditional banks.
fundingsolutions. So what to do? One fairly new re- “One reason is that private lenders of-
com). “If you had source is an array of alternative, non- ten do not need to conform to the same
six months of bank lenders. These online operations federal and state regulations as com-
business history include such entities as Lending Club, mercial lenders.”
and receivables, Prosper, Funding Circle, Kabbage, Nonbank platforms have a number of
banks would throw OnDeck Capital, Headway Capital, other advantages. “Alternative lenders
you money. Then BlueVine, StreetShares, Fundera, Len- are often willing to take more risk in
came the financial dio, Noble Funding, and PayPal Loans return for higher interest rates,” says
crisis and conven- (Not all platforms are legal in all states). Jennifer Rusz, CEO of Sterling Rose
tional financing An additional group of nonbank lend- Consulting Corp, Lawrenceville, GA
froze. Bankers ers caters primarily to consumers, (sterlingroseconsultingcorp.com). Com-
started asking for but also represents potential money mercial banks often want to see steady
cash flow, credit sources for small business owners. In profits over the course of a 12-month
score, and collat- this group are Upstart and Peerform, period, while nonbank lenders are of-
eral. If any one as well as residential mortgage lend- ten more flexible — a special consid-
of the three was ers Quicken Loans and The Money eration for seasonal businesses. Too,
missing, you were Store. “While you could borrow from alternative lenders often welcome cer-
out of luck.” consumer-oriented lending platforms, tain categories of loans — working capi-
Getting to yes you are likely to get less money,” says tal or lines of credit, for example — that
has been made Barbara Vrancik, a small business fi- a commercial bank might shun.
tougher by the nancial consultant based in New York All these advantages make online
continuing merg- City (BarbaraVrancik.com). “They of- platforms attractive. So does another
er of financial in- ten just look at your credit score and one: expertise. “Often alternative lend-
stitutions, leaving income when reaching a loan decision. ers are savvier than commercial banks
borrowers with In contrast, business lenders may take which often experience great turnover
fewer choices. into consideration your total business in their lending officers, many of whom
“Bigger banks revenues and the number of years you can be inexperienced,” says Holt. “Ad-
have been swal- have been in business.” ditionally, nonbank lenders sometimes
lowing community Some alternative lenders operate specialize in certain types of loans or
banks and gravi- as Peer-to-Peer (P2P) platforms, web- continued on page 32

30 Wire Rope News & Sling Technology April 2019