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Alternative Lending Positions Small Businesses for Holiday Success

AUTHOR: Kevin Jaskolka

Many small businesses rely on holiday sales to get them through the year. Whether you're a contractor hoping families gift themselves major home improvement projects or a small e-commerce retailer, the holidays are a great time to grow your business. This year is no exception.

The National Retail Federation expects November and December holiday season sales to increase by between 3.8% and 4.2% compared to last year. This would lead to approximately $730 billion in sales. While there are some concerns about big-picture economic issues slowing sales, the signs still point to a strong holiday season.

As you're preparing for the holidays, you need all of the tools you can get your hands on to put your business in the best position for success. Alternative lending services are one tool that can be valuable for small business owners trying to take advantage of seasonal opportunities.

What Is Alternative Lending?

Let's avoid getting too deep into the weeds. For small business owners, here's what really matters: Alternative lenders use advanced technologies to accelerate the loan application process and get funds to those businesses banks might consider too risky.

In practice, the value opportunity from alternative lenders is pretty straightforward, but it's easy to understand when compared to typical experiences working with a bank.

If you go to a bank for a small business loan - let's say $50,000 to bulk up your inventories heading into the holidays - you're often going to run into problems. That amount of money is tiny for banks, so they don't see themselves as being able to make much from your loan. So if you present any risk, your loan is probably going to be declined. Ultimately, banks face enough regulatory pressure that it'll cost so much to analyze your loan that such a small amount won't create value for them. As such, you're likely to go through a long application process and get denied for the loan.

This makes banks a poor for when you're looking for cash quickly - like when you're trying to get ready for the holidays. Banks aren't bad, they just aren't always a fit. Alternative lenders use modern data analytics to automate a lot of the analysis performed during loan application processes. At the same time, they tend to focus on smaller loans, so they don't face as much regulation as banks. This adds up to let alternative lenders:

  • Get loans to small business in just a few days.
  • Create financing options for businesses that banks would consider risky.
  • Treat lending as an ongoing service by providing multiple, manageable, small loans over the course of a year or two instead of giving you one large loan.

With alternative lenders, you don't have to hold up your business's plans while you wait for a loan application to be processed.

How Can Alternative Lending Prepare You For The Holidays?

The holidays are a great opportunity for small business owners, but you need capital to fund your efforts. Here are some areas where alternative lenders are an especially natural fit during the holiday season:

Payroll

Many small businesses need to add staff to get through the holidays. You may need to:

  • Expand your production/service team to keep up with heightened demand.
  • Pay overtime for sales workers putting in extra efforts to reach customers.
  • Hire seasonal staff for odd jobs that are valuable during the holidays, but don't make sense for your business at other times of year.

These workers will deliver value over the course of the holidays, creating the revenue you need to justify the costs of adding them to the staff. But that doesn't mean you can cover their salaries leading up to the holidays or during peak season. An alternative lender can get you the fast access to cash needed to bring people on board.

Inventory

If you're a product-driven business, you probably need to bulk up your inventory supplies to get ready for increased sales at the holidays.

If you're a service business, you likely need more supplies to get through the holidays.

Either way, you can't necessarily wait through a long loan application process and may only need a small cash injection. Alternative lenders give you the cash you need, quickly, without forcing you to jump through too many hoops while applying for the loan.

Marketing

Managing cash flow is difficult when you need to spend heavily on marketing - either investing in promotions, campaigns or dedicated staff - before those advertising efforts deliver value from a sales perspective. That's exactly what typically happens during the holidays, and it's an area where alternative lenders can help you get the funds you need, when you need them.

Gain an Edge With Alternative Lending

Working with an alternative lender creates new opportunities to treat loans as a business growth tool. This can pay off during the holidays, and Select Funding can help you achieve your goals. Contact us today if you want to learn more about how our lending solutions work and what we can do to help you reach your holiday goals.

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