Warnings About Alternative Lending
Alternative lending is standard for many businesses that have a good relationship with their lending partner. Other companies are wary about using alternative financing for various reasons. The 2022 Small Business Credit Survey (SBCS), a collaborative effort by all twelve Federal Reserve Banks, shows that businesses are more likely to apply for funding with an online lender than a small bank and most sought financing to cover operating expenses. Let’s define alternative lending, determine if it is regulated, and what warning signs you should look for before applying for alternative financing.
What Is Alternative Financing?
Alternative financing refers to loans provided by lenders that are not banks. They normally operate online as they use technology to expand credit access. Alternative lenders generally have more flexible qualification requirements and provide the funding faster than traditional lenders, but tend to offer shorter repayment terms and charge higher interest rates. Alternative lending products include lines of credit, equipment loans, term loans, and invoice factoring.
Is Alternative Lending Regulated?
Various state and federal guidelines regulate alternative lenders, but they are not subject to the same regulations and laws as banks. The industry practices voluntary self-regulation through organizations such as the Innovative Lending Platform Association (ILPA). They also observe and follow the rules laid down by the Treasury Department, Securities and Exchange Commission (SEC), and Federal Financial Regulators.
Warning Signs You Should Avoid A Lender
Some alternative lenders, unfortunately, damage the industry’s reputation with their practices. There are always warning signs that indicate you should avoid a lender, and we highlight a few.
- Is the lender’s website secure with an “https” in the URL and a lock icon?
- Are the terms and conditions and privacy policies indicated on the website?
- Do they fully disclose loan fees and interest rates?
- Are you being forced to sign an agreement immediately?
Reasons To Partner With Kore Capital Corporation
Can we first state that you will definitely find an “https” in our URL and a lock to show it is secure. We prefer clients to be comfortable with our contract terms and payment schedule, and our client testimonials say it best. At Kore Capital Corporation, we find fulfillment in providing solutions to the challenges of our clients. We do this with business financing such as asset-based lending, invoice factoring, line of credit, payroll funding and government contract financing.