In a general sense, online lending- also known as alternative lending- is funding that does not come from a traditional bank. In the past, this included government loans, credit unions, and other credit lines structured like bank loans but from a different source. Now, these are part of the traditional lending market because the terms, criteria, and regulations are the same.
Alternative lenders, on the other hand, are not traditionally part of the financial industry, use different methods to communicate with clients, do not use FICO or other metrics for qualification, and use different approval processes than traditional lenders.
Due to these differences, online lending offers several advantages for borrowers:
- More options for obtaining funding
- Faster funding, which is useful during a financial emergency
- Smaller amounts available
Types of Alternative Lenders
The category of alternative lenders is a catch-all for anything that falls outside of traditional funding. Some of the most common types of alternative loan include:
- Lines of credit
- Peer-to-peer programs
- Merchant cash advance
- Working capital loan
The type that is most appropriate for your business depends on your situation.
Tips for Finding Safe Online Lenders
Before you go online and apply for the first loan offer you find, take some time to research your options. These tips can help you reduce your risk of falling victim to a scam:
- Do they have a physical address? Even though they operate online, a legitimate lender will have a physical address visible. You can then use Google to verify the address.
- Do they have third-party verification? Look the company up on BBB to find their listing and rating. If the company meets or exceeds security and privacy standards, companies like TRUSTe will award their seal.
- Do they have customer reviews? You can’t always use reviews to fully form your opinion because people are more likely to post a negative experience than a positive one. However, find out what people are saying- look for patterns in the comments- to help you determine the safety of the company.
- Who owns the website? Look the site up on WHOIS to find out who owns it and how long it has been around. This will help you determine if they are truly an online lender.
Considering Alternative Lending to Fund Your Business?
Legitimate alternative lenders understand that their success depends on their reputation for protecting their customer’s information. These companies will do everything they can to protect themselves and their customers. If you’re ready to move forward with applying for an alternative loan, contact Abundant Wealth Financial today. We can help you find the funding you need.