Nonbank lenders are becoming increasingly attractive to small businesses, according to an article published today in the Wall Street Journal. (Alternative Lenders Peddle Pricey Commercial Loans)
Loans Offered by Nonbank Lenders
Nonbank lenders offer loans that typically are for less than $50,000 and have high interest rates – sometimes more than 50% per year. The article says that such loans, nevertheless, are popular for the following reasons.
- Nonbank lenders make decisions quickly, within days. Banks, in contrast, take weeks.
- Banks reject many small businesses because they do not have solid credit scores. Nonbank lenders, in contrast, assess creditworthiness based on data such as real-time shipping schedules, accounting-software records and social-media traffic.
- Nonbank lenders offer convenient online applications and loan funding.
Sources of Capital
The article notes that, unlike banks, nonbank lenders do not take deposits that can be used to fund loans. As a result, nonbank lenders arrange credit facilities with financial syndicates to acquire the capital they need to make their loans.
Dana H. Shultz, Attorney at Law +1 510 547-0545 dana [at] danashultz [dot] com
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