Alternative lenders provide more options for small businesses

Forbes has published the last in a series of articles based on a working paper, "The State of Small Business Lending: Credit Access During the Recovery and How Technology May Change the Game," by Karen Mills, former Administrator of the Small Business Administration (SBA). In this latest column, Mills focuses on online alternative lending sources for small businesses and the effect they could have on the overall lending market in the coming years.

According to the latest data from the Federal Deposit Insurance Corporation (FDIC), banks still provide the vast majority of small business loans, totaling approximately $550 billion, while online alternatives account for just $10 billion. However, Mills points out that that rate is up by 175 percent over the last year, whereas traditional bank lending is down 3 percent. In her opinion, online lenders have the potential to alter the lending landscape with the way they do business, which is often much simpler and more transparent for the borrower than it is with banks.

In a separate Forbes article, Ty Kiisel of Lendio, one of these emerging lenders, recommends careful planning as the single most important step for a small business owner to take before applying for a loan. To garner a more favorable interest rate from a lender, owners must be able to demonstrate that they know exactly how much money they will need, what they will invest it in and the effect it will have on their business.

Commercial loan software is a useful tool for borrowers and lenders alike, especially with the proliferation of non-traditional lending sources. Customized amortization schedules ensure automatic, on-time loan installment payments.