Over the past few years, conventional banks have tightened their standards and left more small firms out in the cold. Sometimes the borrowers’ personal credit history is less than stellar, or they’re looking for deals that are too small for most banks to consider.
Enter alternative lenders—a booming group of online firms aimed at small companies that can’t get what they need from regular sources. In some cases, alternative lenders can turn around a deal within a couple of days, or offer loans that last just a few months.
But that flexibility and speed come at a price. Annual percentage rates can soar north of 100%, and there can be steep fees and penalties for things like prepayment. What’s more, even alternative lenders acknowledge that the field is dotted with unscrupulous operators that obscure the true costs of their loans.
With all that in mind, here’s a look at the basic types of alternative lenders, and the benefits and risks they bring to the table.
via With Alternative Lenders, Flexibility and Speed Come at a Cost – WSJ.