Since the global financial crisis of 2008-9, many small businesses and individuals have "de-leveraged."
Deleveraging refers to the process of paying off debt that was accumulated from before the financial meltdown.
This act was an important first step in the economic recovery. But many small businesses that went through the painful process of reducing debt and cutting expenses found it difficult to access the capital markets when it came time to grow again.
Debt has always been the principle method of growing a small business. In fact, some business owners took out home equity lines of credit (or HELOC's) on their homes in order to finance business growth. Others secured lines of credit from their respective banks. The act of finding sources outside of the physical business in order to acquire funds has always been practiced.
And it always worked.
But since the Dodd-Frank Wall Street and Reform Consumer Protection Act made it more difficult for traditional lenders to put capital to work for "Main Street" businesses by implementing strict regulations in to the financial industry, small business owners have been locked out.
One of the lesser known or talked about consequences of businesses being shut out of the capital markets was that it negatively impacted their business credit. Consequently, businesses that were forced to push out payments to venders because they couldn't get lines of credit took a double hit: Venders would give them negative marks on their payment efficiency as they were attempting to build credit back up with financial institutions.
So that’s where alternative lenders came in. To fill the void that traditional lenders left, alternative lenders found their niche in the financing space. Because alternative lenders have more freedom and fewer restrictions than traditional banks, they can approve loans for small businesses that may not receive the funding any other way.
Through the right lenders, small businesses have the opportunity to build their business credit back.
Credible alternative lenders like the ones that Original Funding works with actually file their loans with the credit agencies. As small business owners pay back their loans, they not only put working capital to good use to grow, but they establish a solid credit record.