Alternative financing has truly revolutionized the financing industry by democratizing business funding; it has put affordable credit well within reach of millions of small business owners who have traditionally been shut out of the credit market. For most lenders, especially regular banks, the criteria to qualify for the credit is usually too stringent and unsympathetic for small businesses who usually need this support the most.
While alternative lenders have a broad reach and do provide support to business owners of all sizes and from diverse industries, qualifying for an alt-financing deal still needs to tick some eligibility boxes. There are no fixed rules, and every company has a slightly different set of data points that inform their underwriting process, but here are some points that all businesses owners must keep in mind to ensure that they sail through the approval process without a hitch:
1. Make sure you have a business bank account
Most lenders – like us at Money Matters Now – only process business funding through a corporate bank account, so do make sure to apply for a separate bank account for your company if you don’t already have one.
2. Sanitize your financial history
Yes, we want to help small business owners, but we are a business too, and we must also keep in mind certain risk thresholds that we cannot overstep. Businesses with delayed or non-payments on their immediate financial record will find it difficult to access more credit. So, if you are gearing up to apply to an alt-lending agency, we recommend that you clean up at least 3-6 months of your financial history to improve your chance of approval and to get better terms.
3. Take stock of and reduce your debt burden
You will find it immensely difficult to take on additional debt when you are already straddlingother repayments. Make sure you pay off as many of your existing debts and give underwriters the confidence to approve your application.
4. Make sure you can show a regular revenue stream
One of the key deciding elements for unlocking alternative funding is a proven revenue stream. It is, in fact, even more important than your credit score! You need to show potential lenders that you can easily meet your minimum revenue limit. This is crucial when applying for Merchant Cash Advances that are directly linked to your incoming cash flow.
5. Try to boost your credit score
While most alternative lenders – like us – don’t base our decisions solely on FICO (or similar) scores, they do form a part of our overall assessment. A better credit rating will allow us to lend with more confidence and,of course, offer you better rates.
Usually, only very new businesses or businesses with very bad track records or ones in prohibited industries such as bail bonding, banks and other lenders, debt collection agencies, etc., are turned down by alternative financiers. If you have a profitable business and can show proof of revenue, there is no reason why you shouldn’t be able to get access to liquidity from us.
Do call in at (877-573-6677) to understand your options in more detail.Our team will be happy to take you through some of the finer pointsof the alternative lending landscape.