Businesses typically face reduced revenues and increased costs during inflationary periods, economic downturns, or recession. Additionally, they often encounter restricted business financing as banks intensify credit scrutiny. In these situations, tough decisions may need to be made to stabilize finances, especially if the company can’t qualify for a bank loan, has its lending terms restructured, or had its line of credit recalled. To provide valued guidance to management, financial professionals need a comprehensive understanding of the most effective options for readily available business financing for companies in financial distress.
Fortunately, companies in financial distress that are unable to acquire bank financing, or need more flexible lending terms, now have a selection of alternative funding options specifically designed to provide the money they need when they need it. Over the past two decades, these alternative lenders have changed the lending landscape with significant advancements in fintech to loosen credit access and accelerate the speed of funding.
This article looks at the best alternative lending solutions and lender qualifications for companies in financial distress. Learn what financial professionals need to know about readily available business financing without a bank loan to stabilize finances and position companies for growth when opportunities arise.
Why are alternative business financing options readily available?
Banks typically use the five Cs of credit to assess lending qualification. Following these limited but rigid parameters, banks analyze the borrower’s credit history, financial performance, collateral, and cash flow. This narrow scope typically restricts credit to businesses in financial distress.
Alternative lenders use a completely different set of criteria to qualify borrowers. They use various underwriting criteria, may use different types of assets as collateral, and are not subject to extensive scrutinization by government regulators. Utilizing advanced fintech capabilities, alternative lenders quickly access and analyze hundreds of credit-related data points inaccessible to conventional lenders. By uncovering untapped borrower credit strengths and under-leveraged assets, tech-enabled alternative lenders can qualify, onboard, and start first funding to new business financing accounts in a matter of a few days. This flexibility enables alternative lenders to deliver more money in more ways to businesses in financial distress faster and with less lender oversight than conventional banks.
More money in more ways
Leading alternative lenders leverage one or more financial solutions and services to offer tailored bespoke business financing. This flexibility allows these alternative lenders to provide business financing with few loan covenants and expanding credit limits to support business stability and growth.
The two most powerful funding options alternative lenders provide to stabilize companies in financial distress are:
Faster speed of funding
When companies in financial distress need business financing, they typically need immediate funding. Unfortunately, banks can be slow to approve or reject a borrower’s request for a bank loan or line of credit. Conversely, alternative lenders can complete approvals and account setup and start first funding within a few days. Once the financing accounts are set up, funding requests are processed within hours. For example, eCapital’s invoice factoring clients can have funds transferred directly into their cash accounts immediately after invoices have been received and approved. For transportation fleets, staffing companies, and other businesses needing regular access to working capital, enhanced speed of funding can be critical to reducing financial stresses.
Best lender qualifications to look for
So, if alternative lenders commonly provide easy qualification and fast business financing, how do businesses distinguish between available providers and choose the best lender to partner with? The answer lies in compatibility. If your business is going through financial distress, you’ll need to ensure the lender and their team are reputable, dedicated to world-class customer service, and have easy-to-use tools, systems, and work practices. These features can best help a borrower’s organization manage its way through a difficult period.
The best lender qualifications to look for include the following:
- Advanced technology: Does the lender utilize advanced technology to ensure fast and easy funding to companies in distress?
- Reputation: Is the lender recognized for reliable funding that companies can depend on? Check the lender’s reviews and their clients’ testimonials to confirm customer satisfaction.
- Customer service: Companies in distress often face urgent financial obligations that require immediate resolution. Does the lender assign a dedicated account manager to streamline processes and respond expediently to meet customer needs?
- Industry Knowledge: Ensure the lender has experienced staff, knowledge in the industries they serve, and the expertise to help solve complex financial issues when they arise.
- Transparency: Access to information is critical! Does the lender have a robust online account management portal to monitor balances, transactions, and credit limits in real time?
- Deep pockets: Does the lender have the financial resources to ensure continuous, uninterrupted funding throughout the crisis and support ongoing funding as financial stability leads to business growth?
- Innovation: Is the lender solution-focused and capable of solving challenges in even the most complicated scenarios?
When businesses in distress need business financing, they need it now! As economic conditions continue to batter companies’ stability, financial professionals must step forward with viable solutions to ensure the companies they represent have readily available business financing options. Alternative lending has become a mainstream financial strategy to fund businesses unable to acquire conventional bank loans or lines of credit. But as the economy continues to struggle and more companies face financial distress alternative funding options, such as invoice factoring and asset-based lending, are becoming even more popular as flexible business financing solutions. Alternative business financing options feature fast funding, few covenants, and expanding credit limits that keep pace with business growth. Utilizing these features, companies can stabilize finances in a chaotic economy, support recovery or transition, and fuel growth when opportunities arise.
Since 2006, eCapital has been a trusted financial partner for thousands of companies in financial distress, in transition, or in growth mode. Our customer base continues to grow as our reputation for reliable funding, and dedicated service endures through all economic conditions. If your company has creditworthy customers or quality assets, we can help.
As a leading alternative lender and industry innovator, eCapital integrates emerging technologies with a forward-thinking approach to solving business problems. Working in collaboration with our clients, eCapital shapes customized factoring facilities to meet the working capital needs and cash flow requirements specific to the business financing our customers need.
For more information on readily available business financing options without a bank loan, visit eCapital.com.