It’s sooooooooooo easy.  The small business owner needs cash – fast, maybe for a new opportunity; maybe a new piece of equipment; maybe a fast infusion of inventory to meet an unexpected demand.  Even if the business owner has a relationship with a bank, fast isn’t going to happen.  First of all the loan may be too small, but if not, it still has to be underwritten to some degree and then approved by someone.  By the time it goes through that process the need may have gone.  But with an online cash flow lender, a usually simple application online and an approval within a few hours or maybe a day and the money is sent to your account.  Slam bam thank you ma’am.

Some cash flow lenders, based on the average amount that a business keeps in its checking account will make a loan – sometimes large, as soon as they get from you your bank statements for a certain period.  One or two other things may be checked but that can be done in minutes by the lender while waiting for the bank statements.  Once that is completed, the loan is made.  Fast.  To repay the loan the lender might take a small amount out of the checking account every day or several times a week.  No big deal; so small you’ll hardly miss it. Doesn’t hurt a bit.  But by the time the loan is paid off you could have had an APR in the range of 45%-plus with some lenders.  It is an unregulated industry.

These lenders lend hundreds of millions of dollars a year because there is a demand for it.  They are filling a need that banks won’t.  So if the small business owner needs cash fast they have to understand that it may cost them – big time.  But the cost of not getting the cash could be worse.  So the moral of the story is go in with your eyes open and read the fine print.

More on alternative lenders coming.

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