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

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 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,   ( 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 ( “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
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