Before the financial crisis of 2007-08 and a global economic collapse, banks and other institutions consolidated, and the industry shrunk. Before this time, small businesses had personal relationships with their local banks.
Today, most banks are multi-national entities that don’t see enough profit margin in risking lending out any money on small business loans. In fact, the number of loans issued by 10 of the largest banks in the United States has decreased by almost 40 percent. From $44.7 billion in 2014 compared to $72.5 billion in 2006, one year before the financial crisis hit.
The need for loans by small businesses coupled with the reluctance of large banks to hand out those loans has resulted in increased market share of alternative, non-bank lenders from 10 to 26 percent. While the rates may be a bit higher than a traditional bank loan, the approval rate is typically over 90 percent and the loans are for shorter terms. Which means, even if the rates are a bit higher, the total pay back is completely competitive with that of traditional banks. Banks charge a fee for paying back your loan early, alternative lenders reward you for it. There’s a reason alternative lenders have taken over a large portion of the market share.
Working With Sprout
Sprout is an online marketplace where businesses come to compare and save on small business loans. You go to www.SproutLending.com and simply fill out a profile or call us at 800-865-6057. Based on that information you provided, Sprout suggests the best matches depending on the amount and purpose of the business loan you are seeking. Last year, Sprout and it’s staff was responsible for over $100 million in loan approvals.