A number of new businesses have recently been receiving credit from non-traditional lenders instead of banks. A recent survey of 125 companies showed that a third got their credit from non-banks and 90% said they would do it again.
What is causing this change? Several companies believe that it is an easier process than going through the traditional methods. This includes a simpler application process, less documentation and faster decisions. According to an article written by the Hartford Business Journal, “…companies were also attracted to non-bank lenders by more attractive loan terms, conditions, rates and pricing”. They also decided to go the non-traditional way after banks denied them because of not being able to qualify for a loan.
This kind of migration can lead to problems for banks, because several companies interviewed prefer acquiring loans from more “lightly regulated, non-bank providers.” Although this might hurt banks in the long run, it gives small businesses a larger opportunity to start up and then later expand into new directions.
For more information check out the article at http://www.hartfordbusiness.com/article/20140707/PRINTEDITION/307039971