The demands of customers are rapidly evolving in the current era. With this evolution, business owners are concerned about how to finance their short-term cash flow gaps. Electricity bills, payroll, and other necessary expenses can put a strain on any business’ budget. These strains can sometimes transform into huge financial gaps dragging a company into bankruptcy. However, they can cover it with the help of a finance provider.
The financing services industry is overwhelming with the different types of lenders available, from consumer financing options to direct lenders. Companies are not short on lending programs. However, having multiple options doesn’t necessarily suit the same purpose.
Direct lending is an excellent option for businesses in search of reliable financing. This article will explore the ins and outs of direct lenders to help business owners get through their hard times. So, let’s dig into it.
What is a Direct Lender?
A direct lender is a financial institution aiming to provide mortgage financing. These non-bank lenders don’t go through a middleman to provide funding. Instead, they work directly with the borrower to get the best terms for their loan.
Direct loaners offer their services to small or medium-sized companies that are often not up to the credit standards of large banks. Traditional banks are usually not willing to work with these types of businesses. On the other hand, direct lenders don’t have strict credit requirements.
Who Direct Lenders Work?
Most direct lenders work online. It is because it’s a convenient way to connect with more borrowers. It’s also a way to speed up the process and get funding to businesses in need as quickly as possible. Some direct lenders will have physical locations. However, these are often smaller companies that can only service a limited number of clients.
They usually work with businesses in some financial distress, including companies that are going through a tough time or have bad credit. In either case, these businesses often don’t qualify for traditional financing.
To get a loan from direct lenders, you need to fill out an online form with some general information about your business. It includes things like how much money you need, what you’re going to use it for, and your credit score.
Once you submit the form, the direct lender will review your application and decide about the loan. They’ll send you the money through direct deposit or wire transfer if they approve your loan.
Benefits of Direct Lending
Direct lenders offer several benefits to the borrower. These benefits are what make direct lending such an attractive option for businesses in need of financing. Following are some of the benefits:
Quick Application Process
Whether you apply for retail financing or direct lending, you must go through an application process. Many people find it a tiresome task. However, the application process of direct lending is quick and easy. You have to fill out an online form with some information about your business. The application submitting process can be completed in a matter of minutes. You don’t have to go to the bank or meet with the lender. You can fill out the application form from the comfort of your office or home.
No Hidden Fees
Many lenders will try to sneak in hidden fees you’re unaware of. It could be in the form of an origination fee or a prepayment penalty. However, direct lenders are upfront about all the costs associated with their loans. You’ll know what you’re paying before you sign on the dotted line.
Securing Bigger Loans
Direct lending enables you to build a relationship with the lender. A strong relationship helps you to secure bigger loans in the future. The lender will be more willing to work with you if they know you’re a good borrower. They’ll also be more likely to offer better terms.
Better Interest Rates
You can’t ignore the interest rates when you are up for a loan. High-interest rates can make it challenging to repay the loan. It can lead to more debt. Direct lenders offer competitive interest rates that make it easier for you to repay the loan. Low-interest rates enable you to repay the loan without straining your finances conveniently.
No Broker Fees
Many businesses go through brokers to get financing. However, getting a broker to get funding could cost you more in the long run. That’s because brokers often charge you an upfront fee for their services. In some cases, this fee can be pretty high. It can also be a percentage of the loan amount, which means it can add up to a lot of money. Direct lenders don’t charge any broker fees. It helps you to save money and keep more of your hard-earned cash.
Direct Communication with Lender
Indirect communication with the lender can often lead to misunderstandings. When you go through a broker, there’s always the chance that they might not relay the message correctly. Miscommunication can lead to numerous problems down the road. With direct lending, you’re able to communicate directly with the lender. Direct communication helps to ensure that there are no miscommunications.