You Want A Small Business Loan For What? – Forbes

Depending on which survey you read, as few as 10 percent of them will get a small business loan at the local bank. Nevertheless, thats the first place they will go because many of them dont know about the myriad options available to solve their specific needs for capital to fuel growth, fund working capital, or facilitate capital improvement. The last several years havent made it any easier to get a loan at the bank either. Many small business owners have been beat up by the economy as their traditional source of capital basically disappeared as regulations (among other factors) designed to reign in the big banks trickle down to smaller community bankshurting small businesses. A couple of weeks ago I spoke with Phillip Stewart of Simplified Leasing . They are on the Lendio platform and are one of those alternative specialty lenders mentioned earler. Stewarts focus is helping people access capital to purchase equipment. Im not here to put you into debt, he says. Im here to help you access capital that can help increase your profitability and ROI. Most of the critics of non-bank lending point to the higher cost associated with the financing. True, it is often more expensive. If thought of in terms of a traditional approach to small business lending the capital is prohibitively expensive. Borrowers need to get out of the 5-10 year fixed interest rate mindset when considering this type of capital and need to think in terms of leveraging a short-term loan to take advantage of a special offer or capitalize on other market forces. This type of financing isnt intended to be in place for more than a few months.
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How Much Is Too Much to Pay for a Small Business Loan? – Businessweek

Like payments on any other loan, payments contribute to a borrower’s credit score. Opportunity Fund has lent $5 million through 250 EasyPay loans so far.
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Micro-Lending Is an Alternative to Payday Small Business Loans

So my 54 percent cost makes absolute sense. I will make that tradeoff every single time. Alternative lenders like OnDeck are becoming increasingly popular. They topped $3 billion in loans last year, according to one recent estimate , double the amount of loans for less than $150,000 guaranteed by the Small Business Administration. At the moment, alternative loans are largely unregulated. For the banking regulators that hosted the Fed conference, theres a follow-up question worth considering: If APR isnt the right way to evaluate short-term business loans, what is? The industry suggests looking at something called net promoter score , a measure of customer satisfaction that Gellert cited at the New York Fed. Two of her fellow panelists, Lending Club Chief Executive Renaud Laplanche, and Darrell Esch, a vice president at PayPals ( PYPL ) small business lending programalso lauded the metric. Executives at alternative lenders also argue that high renewal rates show the loans are serving borrowers.CAN Capital CEO Dan DeMeo, whose company competes with OnDeck,has said that 75 percent of his companys customers come back for additional loans, indicating a high-level of satisfaction. Neither of those measures reveals anything about the cost of the loans, though, so they dont replace APRs, which allow borrowers to evaluate various offers of credit side by side. In the consumer lending world, short-term loans with high interest rates have drawn fire from regulators and advocates as predatory debt traps.The Center for Financial Services Innovation, a nonprofit focused on consumer finance, suggests best practices for small dollar personal loans: Lenders should practice transparent marketing and help borrowers build credit.
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