Landing a good deal with an alternative lender requires careful planning and vetting. The loan application should convince the lending platform that the borrower can capitalize on the borrowed funds and can meet the repayment schedule.
“Start by identifying what you need the money for, how much you need and for how long,” says Barbara Vrancik, a small business financial consultant based in New York City, N.Y.
Then go one step further by showing the prospective lender how the borrowed money will result in higher profitability, generating the funds required to repay your loan.
“Have a detailed plan showing how your loan will make at least two times as much money as its total value,” suggests Marilyn J. Holt, a Seattle-based consultant and author. “And have a strong, verifiable plan rooted in reality for how and when you will make your repayments.”
When researching prospective lenders, Vrancik suggests asking these questions:
· What are the interest rates and fees?
· How frequent are repayments, and in what amounts?
· Does the lender require collateral?
· Will the loan restrict your ability to incur additional debt, or to operate your business in any way?
· Can you modify the terms of the loan if you should need a waiver or extension down the road?
Compare the answers from the prospective lenders and go for the best deal.