As a result of the financial drawback, banks have tightened up their belts regarding how much they are willing to loan to new borrowers. Some will not lend money out at all to unknown borrowers without their first establishing a positive credit history. But how can such people establish a positive credit history when no one will lend them money. These millennials, unable to secure funds from traditional lenders, are often forced to find their money other ways. One option is from alternative lenders.
What are Alternative Lenders?
Alternative loan institutions are credit card companies, banks, and lending institutions that are willing to lend to first-time borrowers and take a chance on them, even if they have little or no previous credit history.
Some of the alternative loan places that currently lend money to millennials include:
The Lending Club
The Lending Club has gained quite a bit of attention in the media in recent months, due to its willingness to lend to people with no credit. The Lending Club started out as a personal loan business in 2007 and changed to a small business platform in 2014, in order to better serve young entrepreneurs and businesses. The Lending Club finances up to $100,000 in business loans and tends to give preference to small businesses with a promising future and a few sales, rather than businesses that are just starting out and are fairly unestablished. The more you can prove they will get their money back, the more likely it is that they will lend you money. They are partial to young entrepreneurs and like millennials who are determined to make their business thrive. Interest is charged at a rate of 5.9% to 29.99%, depending on your credit record, income-to-debt ration and a few other factors at the time of loan application.
Fundbox
Fundbox has a different slant on the lending process. In fact, in a sense, they are not a lending agency, but instead an advance pay system. They are perfect for young freelancers, such as writers, independent contractors of all kinds, and others who need consistent income on a weekly basis and don't want to wait until their clients pay them. In essence, Fundbox advances independent contractors what the companies owe them in advance plus interest and a lending fee, so that they get their money on a more consistent basis. It's a good idea for independent contractors who need regular income and have multiple pay platforms who pay spasmodically.
Square Capital
The "Square" has become popular among merchants who like to use their mobile phones or tablets as a payment processing center "on the go." Using cutting edge software systems, merchants can let customers pay this way anytime with a wireless connection. Square Capital is a way for business owners to receive advance payments that they will receive in the near future so that they can use the capital, instead of waiting on it to arrive normally. The advantage is that, for working businesses with a steady cash flow, this is a way to have immediate money, but caution should be utilized not to use it too much as the interest can add up over time. But it is a great solution for either budding entrepreneurs, new millennial business owners, or those seeking a way to have money now as you build your empire. Interest varies but there is usually a flat dollar fee per transaction. We might mention that Paypal also has a similar platform where business owners can be advanced monies as they grow their business, with similar interest charges.
OnDeck
For those interested in a serious loan, OnDeck might be the best option. Offering loans of up to $250,000 to business owners who clear $100,000 of revenue per year, OnDeck is a good lending alternative to traditional banks. With OnDeck, you do need a minimum credit score of 500, which is still relatively low, when compared to traditional lenders.
Kabbage
Kabbage is a popular alternative lending option with new business (both online and offline). They will loan up to $100,000 to business owners who have at least a $60K income from sales per year, and they do all of it using their online automated software system. With specific algorithms to weed out the negative factors, they choose who they will loan to with nothing more than "the ghost in the machine."
Upstart
Upstart is one of the most popular alternatives for lending for millennials due to its willingness to lend from $3-$35K and many loans can be obtained overnight. They say on their website that they focus on much more than your credit score, citing everything from educational achievements to previous employment history as factors that are weighed in their decision. The amount of interest you pay will be determined by the "grade of loan" you choose, and amounts can be up to $35,000 with monthly payback options available. All loans through Upstart are made via CrossRiver Bank, a New Jersey commercial lending institution.
Conclusion
These are some of the best alternative lending institutions for young entrepreneurs who seem to have it together in terms of understanding the pitfalls and challenges young business startups go through. They are all different in their terms, conditions, and amounts you can borrow. But their common ground is a desire to help budding business owners and entrepreneurs to find their footing in a world that requires capital to give it the jumpstart it needs to succeed. Read the fine print before committing to any of these programs, but these are all viable alternatives when you hit a financial road block with traditional banks and lenders. For many millennials looking for funding for their new business, it's good to know there's a safety net when you need it.
