Nonbank Lenders Increasingly Attractive to Small Businesses – WSJ

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)

The lenders cited in the article include OnDeck Capital Inc., Kabbage Inc., CAN Capital Inc. and Business Financial Services Inc.

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, they arrange credit facilities with financial syndicates to acquire the capital they need to make their loans.

Check out all posts about lenders to small businesses.

Dana H. Shultz, Attorney at Law  +1 510-547-0545  dana [at] danashultz [dot] com
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