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When finding a traditional small business loan fails, there are other places smart entrepreneurs can seek out to ensure their fiscal picture is in the black rather than in the red. From microlenders and peer-to-peer loans, and alternative lending solutions for Realtors in California, there are a variety of ways small business owners can find and borrow money. Here is a list of alternative lending options that may be a good fit for you or your business. Microlenders Microlending is the practice of lending small amounts to fledgling business owners to encourage self-sufficiency. There are for profit and non-profit microlenders. Even the U.S. Small Business Administration has gotten into the microlending game. It’s a savvy move for some buyers. First, most banks won’t make small loans to businesses because the profit margin is low. If you need to borrow $50,000 or more, a bank is a great place to start your loan search. However, if you’re looking to borrow less than $10,000 a microloan could be a good solution for you. Microloans generally have slightly higher interest rates than bank loans, but borrowers don’t have to borrow against the equity in their homes to obtain these loans. Many of these loans have very specific criteria, though. For example, some microlenders only make loans to women or to people in certain geographic areas. If you’re seeking a small loan, it may be worth your time to research microlending. Peer-to-Peer Lending An off-shoot of microlending, peer-to-peer lending is essentially borrowing money from people who aren’t related to you. Typically done through a website that seeks investors, or people willing to lend money to strangers based on their creditworthiness or other factors, peer-to-peer lending allows the general public to invest in borrowers the way banks do, only on a much smaller and more personal scale. In 2005 and 2006, the largest peer-to-peer websites originated more than $6 billion in loans. Peer-to-peer loans seek to cut out the middle man – or the bank – from the lending process. Rather than Average Joe sticking his money in a savings account or certificate of deposit the bank will use to lend to others, Joe could instead get online to find a project or person to lend his money. In return, Average Joe will receive a higher return – these loans will cost more interest than Average Joe will earn on his savings account. Most borrowers also receive a lower interest rate than they would at a traditional bank. Commission Advance Loans As the name suggests, these loans offer advances on real estate commissions. They are great alternative lending solutions for Realtors in California and other states. The companies that offer these services don’t call these loans as they are essentially cash advances on pending real estate transactions. However, the advance application and approval process works somewhat like a loan. First, a real estate agent applies for an advance online, and receives a contract or agreement to sell part of the commission back to the advance company once a pending real estate contract closes. Both the real estate agent and an agent’s broker must agree to the terms of the cash advance contract. From start to finish, the entire process can take as little as one day. Generally, there are no hidden fees, credit checks or minimums or maximums. The amount of your advance is dependent on the commission of a pending real estate contract. Most of these companies allow agents to receive a cash advance on more than one pending contract. Not all business owners and entrepreneurs have access to traditional bank loans, and it goes without saying that not all business owners and entrepreneurs want to be beholden to a bank. These modern lending solutions offer an alternative for borrowers.
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