Working With Private Lenders
What are private lenders? Before we get into what private money lenders are, let us discuss what they are not. Private investors are not solely about connecting businesses with available third-party funding or brokers that arrange financial partnerships for a fee. Rather, the funding that private lenders provide is directly from their own resources.
There are a variety of benefits to seeking small business funding through private lenders, such as:
Qualifying Factors – Current market restrictions have put a stranglehold on lending guidelines. Traditional lenders are held to stringent standards which means that credit score becomes a leading criterion. Private money lenders can often be much more flexible when it comes to the qualification process. It is not as if credit score or financial history does not matter; however, it is much more than a number on a page.
Limit of Loans – Again, because the money that private lenders supply is their own, they are able to solely determine the amount they are willing to extend. Since they work with different terms – such as offering funding in exchange for equity, partial equity, or convertible debt – they are just as committed to seeing the business succeed. As a result, private lenders will extend the funds needed to get a business up and running completely and successfully.
Loan Details – With traditional start-up business loans, you are essentially dealing with principal and interest, and depending on the market at hand, interest rates can cost borrowers a considerable amount of money. With private lenders, the terms of the loan are more flexible.
Ultimately, it is important to remember that there are other options to consider when it comes to small business funding; private lenders offer an alternative road to getting a business off the ground and running successfully.