Convenient access to finance is crucial to the growth and development of any business. Whether you are still developing your business idea, have just founded a startup, or are looking to scale up, access to financing is key. 

Small businesses have a range of options. All of them have their own considerations, benefits, and disadvantages. Here, we are taking a closer look at the pros and cons of working with a direct lender.

Alternative to traditional lending

Traditionally, businesses would look to banks for loans to help finance their expansion, new premises, or vital new equipment. However, since the financial crisis of 2008, it has become harder to secure approval for business loans from traditional lenders. 

Direct lending offers small and medium-sized businesses a viable alternative to banks and other financial institutions. The funds your business receives are held directly by the lender. In turn, the lender raises capital from outside investors. 

Advantages of using a direct lender

Access finance easily

Direct lenders will consider lending to businesses that cannot secure finance from a traditional bank. Banks generally decline more applications for business loans than they approve. This is because lending to small and medium-sized businesses carries more risk in relation to expected returns. 

Direct lenders approach risk and reward in a different way. By doing that, they are not only filling a gap in the financial services market. They are allowing businesses like yours to grow.  

Single contact – quick cash release

Direct lenders handle the entire process from start to finish. Your application is received, evaluated, and approved by the same company that provides the loan. As a borrower, you benefit from faster approval times and quicker access to your funds. 

This is an essential advantage over traditional financial institutions, which can take weeks or months to assess your company’s application. Time is of the essence to small business owners, to take advantage of growth opportunities. 

More and more direct lenders operate online. As a business looking for a loan you complete your application from your desktop or even through a mobile app. Depending on your company’s individual circumstances, you may get instant approval and have access to your funds within 48 hours.

Flexible loan terms and conditions

Big banks often have one set of terms and conditions for business loans. However, businesses and their requirements differ. Direct lenders are not bound by restrictive policies and may be able to adjust loan terms to suit your circumstances. 

As more direct lenders are entering the market, debtors have access to a wide range of interest rates and repayment terms. As a small business, you can find finance that suits your circumstances. 

Disadvantages of direct lending

Requires shopping around 

Finding the best loan for your business takes time.  If your business is going through a particularly busy period, working with a broker may help speed things up for you. To benefit from going directly to a lender, you need to factor research time into your business planning process. 

Comparing rates can be tricky

Direct lenders offer a wide variety of interest rates and loan conditions. This means you can find the best fit for your business, but it also makes comparing loans less than straightforward. A broker can save your company some time with this process. Whichever option you choose, it is worth taking the time to find the best deal. 

Trust is crucial   

Traditional lenders have built customer trust over years of doing business. Strict regulation also gives you as their customer peace of mind. Direct lenders have less of a legacy on which to build customer trust. Making time for due diligence is important before accepting a loan offer. 

Is direct lending right for your business? 

The old saying of ‘speculate to accumulate’ is still as current as ever. No small or medium-sized business can grow and develop without funds. 

With traditional bank loans being harder to access for smaller companies, direct lending offers a viable alternative. Businesses benefit from the fast assessment and processing of loan applications as well as flexible terms. 

Most direct lenders are small, agile companies, making them a better fit for many growing businesses. However, as direct lenders are not as tightly regulated as traditional financial institutions, it is crucial that you do your due diligence. This includes thoroughly checking a lender’s credentials and the terms offered. 

The great news about working with Intrepid is, we can help you find the best solution for your business. We can provide direct lending solutions as well as broker your financing. Apply for a flexible financial solution today and be guided by one of our experienced finance experts.