Small businesses can have different funding requirements depending on the industry segment it belongs to and the line of work it does. Hence, every funding requirement is based on the kind of function it will support for the borrower’s business. Senior debt financing is one such mode of business funding which is available at a much lower cost to the borrower. Generally, such funding is collateralized to secure the debt although when you borrow from an alternative lender, many of the terms of credit are relaxed to make it easier for your small business. Other than that, it more or less resembles any collateralized loan with low risk for the lender, low cost for the borrower for whom the debt is amortized wherein, s/he can repay it over an extended period of time.
Funding that meets your unique requirements
The main advantage of alternative funding for a small business is that you have access to different modes of funding that are suitable for different needs. For instance, if you want to purchase capital equipment costing a fortune, it is not possible with a small merchant cash advance, which is ideal for meeting short term cash flow volatility.
To purchase capital equipment or commercial real estate you need a large loan at a much lower cost because it takes a long time to repay such a large debt. Business capital loans by way of senior debt financing are the ideal mode of credit for meeting such high value purchases. The capital asset you purchase is collateralized to secure the debt, which is amortized for easier repayment.
Hassle-free credit that you can access in quick time
When you borrow from an alternative lending company, you will experience a qualitative difference in the way your loan application is handled. The priority of such lenders is to meet your requirements as easily and quickly as possible and not bring up procedural barriers that usually happen with traditional lenders.
It is not that the alternative lenders do not have any procedures at all but when you apply for business funding to them, they treat that as an opportunity. They won’t look at your need as a one way grant to a needy person. They make no bones about the mutual benefits that accrue to both your business and theirs from this transaction. Such an approach lends confidence and respectability to the borrower.
Choose from several modes of credit that are available
Small businesses face much greater challenges of survival and are usually at a disadvantage in terms of high value assets. Hence, when you apply for funding to an alternative lender, they first try to understand your business, your cash flows and your specific requirement for funding. It helps them to suggest the most ideal form of credit to you.
They therefore, insist on verifying your bank account statement for at least a year going back from the point where you sought the funding. If you need working capital funding, that would indicate a short term requirement. On the other hand, if you need the funding to acquire assets like capital equipment or real estate, it means you have a long term requirement.
Haley Hayward is an experienced writer at gblogo.com, where she’s credited with more than 200 articles covering everything from entrepreneurial stories to mental health at work.
She also oversees the Comment&Questions, which poses important admission questions to experts in the field, and regularly hosts webinars on various aspects of the business school experience.
Prior to joining gblogo.com, Haley honed her skills as a freelance writer, tackling a wide array of topics from petcare to car maintenance.
Haley holds a Master’s degree in English Literature from the University of Edinburgh, Scotland.