Understanding Business Loan Brokerage and Alternative Lending
How does Alternative Lending Industry REALLY work ? 🔗
00:00 Business Loan Brokerage Overview
A business loan broker discusses the role of alternative lending in helping small businesses access capital. With banks approving only 1 in 8 or 9 applications, brokers assist businesses, including startups, in obtaining loans ranging from $5,000 to $500,000. Key questions for potential borrowers include how much they need, when they need it, what the funds will be used for, and the nature of their business.
01:30 Importance of Business Bank Accounts
Understanding the financial structure of a business is crucial. Brokers need to confirm that businesses have a dedicated business bank account, as this is essential for processing loans. Additionally, assessing the average revenue helps in determining the business's financial health.
02:45 Credit Scores and Easy Access to Funds
For individuals without a business, the broker can help them secure funding based on their credit score. The process is simplified by requesting a PDF of their credit report, which allows for quick loan assessments without extensive documentation.
04:15 ROI and Business Growth
Brokers emphasize the importance of focusing on the return on investment (ROI) when discussing loans. Clients should understand that the goal is to use borrowed funds to generate more revenue, rather than fixating on interest rates. The conversation should center around how the funding will positively impact their business.
05:30 The Future of Alternative Lending
The alternative lending industry is anticipated to continue growing, as many small businesses struggle with traditional bank loans. This sector is expanding, with more products becoming available. The ongoing demand for flexible financing solutions indicates a bright future for alternative lending.
What are the key questions to ask a potential borrower?
The key questions include: How much do you need? When do you need it? What will you use it for? What type of business do you own?
Why is having a business bank account important?
A business bank account is crucial because it allows brokers to assess the financial health of the business and facilitates the loan process. Without it, funding options are limited.
How does ROI play a role in obtaining loans?
ROI is important as it helps clients understand how borrowed funds can generate additional revenue for their business, making the investment worthwhile despite interest rates.