It used to be that if you wanted to start a business you had to get a bank loan or bootstrap it yourself. Those days are no longer, as more and more non-traditional lending sources continue to pop up. And more entrepreneurs — particularly young entrepreneurs — are taking notice.
According to a recent Bank of America study, 14 percent of millennial business owners have turned to non-traditional lending services. These include things like peer-to-peer lending platform Lending Club or online service OnDeck Capital, both of which went public within the last month.
By comparison, just one percent of baby boomers and three percent of Gen-Xers have taken advantage of these types of lending services.
So why the interest among millennials? First of all, many of these services offer cash quickly. And they don’t have a lot of the same qualifications for lending that traditional banks do.
For instance, established business owners are more likely to have built up a respectable amount of credit over the years. They are also likely to have more collateral and other items of value. So getting a traditional bank loan is more attainable. But young millennial business owners likely don’t have that history of credit or access to collateral. So they have to seek out other forms of funding in order to succeed.
David Solis, sales performance manager at Bank of America told CNN:
“Millennials are on the earlier curve of their small business ownership and entrepreneurial paths. It makes sense that they’re going to be pursuing alternative forms of lending.”
But in addition to those factors, technology just seems to be having this kind of impact in every industry. The Internet has opened doors for peer-to-peer sharing in all different areas of business. So it makes sense that it would happen in lending as well.
Older business owners might not have the absolute need to turn to alternative lending platforms. But it just might be the way that the industry is headed. And even if it isn’t a necessity, an abundance of options is never a bad thing for business owners.
Millennial Businessman Photo via Shutterstock
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I just think it’s cool that these types of funding are available, let alone who is using them. Glad to see more tools for entrepreneurs.
It is really cool to see so many more options becoming available in such a short period of time. Seems like people are still coming up with so many new tools each day too.
This goes to show how millennials are really flexible in their options. They are more adventurous and willing to explore alternative lending which used to be not an option for past business owners.
I think that is true in a lot of cases.
Alternative business loan sources are going to continue to grow in the marketplace. Banks tend to take a very long time to approve business loans. What is the business owner to do when they need cash quickly? I think they have a place in today’s economic environment where it is hard for small businesses to get loans.
That’s why it’s so great to see so many new options! And as you said, I would expect to see them continue to grow.
I’m glad alternative business lenders are getting the recognition they deserve. After the recent recession, banks just haven’t been lending to small business owners at the same level they did in the past. This new breed of lenders are helping to level the playing field.
It is really great to see, isn’t it?