What are alternative lenders and how can they benefit your business?

What are alternative lenders

As the name suggests alternative lenders are an alternative to traditional banks when applying for finance.

These are usually private companies or new emergent banks that offer business loans for a variety for purposes, either funding for various reasons such as to cover the cost of Corporation Tax, VAT, Income Tax and business refurbishments for example, or more specialist loans such as asset finance.

Since the credit crunch in 2007/8, traditional bank lending has declined leaving many businesses struggling to obtain business loans.

Alternative finance providers have stepped up to fill the gap in traditional lending, which has been a lifeline for many businesses.

There are a range of lenders now in the market, specialising in different types of loans, company types and financial statuses, many businesses who have been unable to access traditional lending now have alternative options.

Many businesses can benefit from this alternative route when applying for a commercial business loan as it can be quicker and easier to seek out funding.

Unlike traditional banks, many alternative lenders operate as “Fintech Companies”, which are usually accessible online.

The option to search online can help you obtain facilities in a shorter time period than traditionally obtainable because of the lack of necessity to have face to face meetings with banks or carry out long applications waiting for documents in the post.

Many lenders need minimal information to get the ball rolling.

What are the alternative sources of finance?

There are a few alternative lenders who offer commercial business loans. The main types are:

  • P2P (peer-to-peer)
  • Challenger banks
  • Specialist lenders

What are P2P (Peer-to-Peer) Loans?

P2P platforms are quite common in the UK market and work like marketplaces bringing together companies seeking funding and companies or individuals who want to invest.

The P2P platform acts as an intermediary, matching the investor and borrower together. Many companies can secure competitive unsecured loans through P2P platforms, however at times it can take longer to obtain finance than with other funding routes depending on the complexity of the loan.

What are challenger banks?

Outside of the “The Big Four” major High Street Banks, HSBC, Barclays, NatWest and Lloyds Banking Group, there are many new younger banks that offer business loans.

These newer banks are actively increasing their market share and challenging the major high street banks.

One of the tactics they use to entice customers is to offer more flexible and competitive terms on business loans as well as other facilities such as overdrafts, invoice finance (invoice discounting and factoring) & trade finance, and in some cases more relaxed eligibility criteria.

What are specialised lenders?

Traditional lenders normally only lend to certain business types such as those that have longer trading histories or those that trade in established markets.

There has been in increasing number of specialist lenders seeking to cater for those businesses that do not meet this criterion.

For example, new business start ups, low credit score applicants or those that operate in new uncertain emergent markets.

Some specialist loan types include;

How to apply for alternative business finance?

Small business loans, large commercial business loans or even short term finance has become increasingly available with the emergence of alternative funding.

There are a whole host of alternative lenders in the UK market and knowing which is the most suitable for you when applying for a business loan can be a dauting task.

It is particularly important that you research which lenders specialise in your type of business, your circumstances and funding requirements.

If you apply with every lender, you can find and get rejected, this can have a negative impact your credit score, making it harder to obtain finance in the future.

Whichever lender you choose to apply with, you will need to provide certain documents and information to process your application.

Generally, you will need to provide:

  • Accounts
  • Management accounts
  • Bank statements or authority for open banking
  • Personal net worth statements
  • Rationale of why the funds are required

As it can be difficult to find the most suitable lender for your needs, many businesses opt to use a finance broker. The main advantage to using a finance broker is that they will know which lenders are more likely to accept your application based on your lending requirements and financial status.

Here at RLA Capital we have streamlined our application process to enable to you to quickly access funding.

Our application process is simple.

  1. Fill out our application form in less than 5 minutes
  2. Your application will be allocated to your dedicated case manager
  3. Your case manager will be in touch within 4 working hours
  4. They will collect all required documents to process your application
  5. You will receive a decision within 72 working hours in most circumstances
  6. You will receive your funds within 48 hours of acceptance in most circumstances

You can apply for a business loan here.

Updated: June 16, 2021