Alternative lending is becoming a vital source of funding for small businesses that face challenges securing loans from traditional financial institutions. The Wall Street Journal reported a 38% decrease in bank loans to small businesses over eight years, while alternative lenders saw approval rates of 30% in November 2023. Alternative credit includes peer-to-peer lending, equipment loans, and fintech platforms, often utilizing digital data to evaluate creditworthiness. This approach can benefit the estimated 45 million Americans with insufficient credit history, including minorities and low-income individuals. While alternative lending offers quicker access to funds and fewer requirements than banks, it often comes with higher interest rates and is less regulated. Business owners are advised to thoroughly understand the terms and true costs associated with alternative loans to make informed decisions for their ventures.
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