Why is alternative lending currently on the rise?
Alternative lending is on the rise because many banks are not lending, contrary to what most people may think. This year, most businesses that don’t do more than $1M will never see bank funding.
Here is a short explanation of bank lending:
Under normal circumstances, deposits and loans are more-or-less equal across the banking system as a whole. This is because when a bank creates a new loan, it also creates a new balancing deposit from “thin air”, not from existing deposits.
According to CNBC, bank lending funds increased from $9.5 billion to an all time record high of $2.3 trillion last year. So what are the banks doing with that enormous liquidity? The answer is absolutely nothing. Why? Banks simply put that money back where it came from: The Federal Reserve. Instead of earning 4.5% percent on car loans or 10% on other funding, banks choose to deposit .25% to the Reserve. So with all of this money accumulating, why aren’t these banks lending?
What affect is it having in the marketplace?
More merchants see alternative funding as a better solution than bank lending according to a 50 merchant survey done by industry professionals. Most merchants will easily take the more expensive cash advance rather than go through the scrutiny of bank lending so they can concentrate on running their business. With alternative lending, it only takes 3 days to get funded rather than the standard 30 days, thus alternative lending is seeing a huge explosion of Grade A credit come to the merchant cash advance area.
Here at Professional Cash Advance, we do just that! We offer competitive prices and rates that most banks offer, totally unsecured and you will get funded in less than 3 days time with minimal paperwork.