Since the recession big banks have struggled to meet the required return on their investments with small and medium business lending is because the cost and effort in the underwriting process for these small loans is too high. Alternative lenders address this barrier through a combination of higher interest rates for the risk associated and innovation in the underwriting process. Through innovation, alternative lenders have been able to streamline the underwriting process using new technologies. This has allowed them to keep their costs lower. Another benefit to these innovations gets passed on to the borrower: the benefit of a timely and flexible funding process. While the typical time for a business to obtain funds through traditional lending sources is 60-90 days, alternative lenders are able to provide in 2 to 10 days. In 2015, Lendio’s average time to closing was 8.9 days.
One of the biggest struggles SMB owners face is that of managing cash flow. Growing or starting a business can be very capital intensive, and predicting and managing the timing of the cash flows is very difficult. A variety of situations from delayed accounts receivables to increased inventory demand contribute to the complexity of cash flows. Alternative lenders have a spectrum of loan products enabling them to match a loan to the cash needs of the small business. These products not only help smooth cash projections, but SMBs are also able to seek funds on short notice when they find themselves in a cash crunch. The flexibility and the speed at which these loans can be funded is an important need that the alternative lending industry is meeting.
The following is a table of the average closing time for the common loan products that Lendio has to offer:
|Loan Product||Time to Funding|
|AR Financing||1 to 4 weeks|
|Business Loan Small||1 to 3 weeks|
|Business Loan Large||2 to 12 weeks|
|Business Line of Credit Full Doc||4 to 16 weeks|
|Equipment Lease or Loan||5 to 21 days|
|Merchant Cash Advance||2 to 10 days|
|Peer to Peer||3 to 21 days|
|Private Loan||3 to 30 days|
|Professional Product||2 to 12 weeks|
|Purchase Order Financing||1 to 4 weeks|
|SBA 7a Express||2 to 12 weeks|
|SBA Patriot Express||2 to 4 weeks|