It’s a rapidly changing world – social, environmental, and economic conditions are evolving at an accelerated pace bringing new norms, expectations, and language in their wake. The financing world is no exception! Digital transformation has altered the commercial financial landscape from century-old conventions and standards to innovative new products and services. Businesses are responding with growing expectations for more flexibility and faster funding speeds. As these transformations occur, new speech is developing to communicate emerging concepts.
Bespoke financing is a relatively new concept, coined and popularized in the United Kingdom and now taking root globally. It refers to the customization of a loan structure to accommodate the expectations and preferences of the borrower.
Traditional commercial banks continue to restrict credit to small and medium-sized businesses (SMBs) during recessionary periods. Meanwhile, SMBs from all industries seek alternative lenders to provide the funding they need to support operations and fuel growth. As bespoke financing continues to evolve, providing more money in more ways, faster, and with more convenience, small and medium size businesses are welcoming this new financing norm.
Keep reading to learn more about bespoke financing and how to choose a lender who provides business loans on your terms.
What is bespoke financing?
Bespoke is a term used to describe a custom-made product or service. Traditionally associated with custom-tailored clothing, the term has been extended to include information technology and digital funding services. Bespoke financing refers to a loan personalized to a client’s specific need and structured to meet the borrower’s expected ability to repay the loan over time. It can include several products, including:
Traditional bank loans are typically approved or rejected based on formal credit scoring models that assess eight to ten variables. Loan approvals are judged on the borrower’s credit history, financial performance, and cash flow. These qualification requirements lie beyond most SMBs’ ability to meet, forcing them to seek funding elsewhere.
Bespoke financing takes an entirely different approach to qualification by using advanced technology to source and evaluate information from extensive databases quickly. Tech-enabled alternative lenders can assess up to five hundred credit-related data points to uncover credit strengths and asset utilization opportunities to help mitigate risk. These lenders consider the borrower’s current assets, current and future cash flows, and other prospects to approve flexible financing, so everybody wins.
The qualification process is lightning fast compared to traditional bank financing. Whereas banks usually take weeks and sometimes months to approve or reject a loan application, alternative lenders take just a few days and sometimes just hours to approve bespoke financing.
Bespoke Financing is Flexible Financing
Conventional loans are typically structured with an established credit limit and a regular repayment schedule. This rigid structure places undue duress on the borrowing company’s cash flow management. The company is restricted to the amount of funds available and repeating due dates for loan repayment obligations place reoccurring stress on capital resources. The company may delay or miss a loan payment if the loan’s ROI falls short in any given period. Missed payments can negatively impact the borrower’s credit rating and incur further bank oversight and restrictions on the loan.
Alternative lenders continuously develop bespoke financing to deliver funding solutions to make customers’ lives easier. Quick, easy qualification, fast onboarding, and immediate response to new funding requests accelerate the speed of funding from painstakingly slow to warp speed. Increasing credit limits based on more or better-quality collateral assets allows for expansion and the pursuit of business development opportunities. Repayment obligations based on incoming cash flow remove the burden of regular payments – a distinct advantage for seasonal businesses and companies that experience cash flow gaps.
Room to grow
Perhaps the most significant benefit of leveraging bespoke financing with alternative lenders is the ability to control your finances. Bank loans come at a price far more significant than interest – it will cost you a loss of fiscal autonomy. Bank loans are governed by restrictive covenants and reporting obligations that can curtail your company’s ability to grow. This heavy oversight restrains capital management and strangles a borrowing company’s growth potential. By monitoring financial ratios, cash flow, and balance sheets, banks ensure your loan doesn’t go south and impede their portfolio performance.
Bespoke financing with alternative lenders is free of most covenants and reporting obligations. Funds can be requested and used at the sole discretion of the borrower. Pay bills, expand operations, or increase marketing budgets to penetrate a new market – use the funds for whatever purpose or objectives you have in mind.
Choose the right alternative lender
The real challenge with bespoke financing is selecting the right alternative lender best suited to your business needs. There are numerous alternative lenders – some with advanced technologies and extensive experience in specific industries, while others are limited in both capacities. Carefully choose the alternative lender you want to work with. Interview candidates and ask critical questions:
- How long have they been in business?
- How many years of experience do they have in your industry?
- Do they understand your working environment and the services you provide?
- Do they offer flexible funding solutions tailored to your needs?
- Can they provide industry insights and recommendations to help maximize profitability?
- Do they have a solution-focused approach to solving complex issues?
- Do they have advanced technologies designed to streamline funding?
Collect as much information as you can from various lenders. Measure their capabilities, weigh the cost of their services, and choose a financial partner you can trust. A reputable, responsive, dependable lender is a competitive advantage for growing companies in a struggling economy.
Bespoke financing is a relatively new concept. Still, it is rapidly becoming the standard norm for small to medium size business loans as commercial banks concentrate on larger corporations for portfolio growth. Since the financial crisis of 2008, small and mid-size businesses have struggled to find adequate funding sources to support growth. Recognizing a gap in the market, alternative lenders have embraced bespoke financing to meet the rigorous demands of SMBs.
The great news is that the digital transformation to more accessible financing is still in its early stages. Advancements in technologies and innovations in funding solutions are being continuously developed. Tech-enabled lenders will endlessly pursue faster, more convenient ways for SMBs to access more working capital to support growth opportunities. These lenders embrace bespoke financing and offer business loans on your terms.
SMBs need a financial champion to provide reliable funding and help guide growth. eCapital’s mission is to empower companies by accelerating their access to capital and providing the autonomy to control their finances independently. Our team is committed to delivering a single solution that allows SMBs to get money, move money, send money, save money, and make money all in one platform.
To learn more about the many bespoke financing options we provide, visit eCapital.com