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Alternative Lending is a term used to describe the vast range of loan options available to consumers and businesses excluding the traditional bank loan. It is available to individuals and business owners who are not able to take a loan from banks because of their ineligible credit score or due to any other potential reason. Such people can easily take credit from Alternative Lending platforms.
Alternative Lending is a lending option for individuals and businesses, like any other lending platforms such as P2P Lending, FinTech, etc. mostly preferred by small businesses and startups. It provides small businesses and startups with credits in an easier way than other traditional banking platforms.
Often Small businesses and startups are not able to qualify for funding from traditional banks because of strict eligibility norms. On the other hand, businesses are more likely to qualify for funding if they choose Alternative Lending option.
Alternative Lending is comparatively flexible with its terms of lending and has less strict rules than traditional banks. Therefore, they easily provide loans to people and business owners even when they don’t have much experience, or have a bad credit score, etc.
Sometimes alternative loans can have higher interest rates than traditional banks, but it covers up this drawback as it is available to people who cannot rely on banks for getting fundings. They can build opportunities for new businesses that otherwise wouldn’t have been able to get credit from traditional financial institutions. They can get easy loans in this way and can invest back into the business, manage cash flow and continue to operate for years in the coming future.
Although there are numerous forms of Alternative Lending, here I am detailing some of the most common ones used by business owners on a regular basis:
There are several benefits of taking loans from alternate lending platforms. Let’s see what those are:
The major concerns while opting for alternate lending are as follows;
Given under is a list of top 10 Alternative Lending Startups in India:
The last five to ten years have been a very beneficial period for the Alternative lending industry in India. Moreover, the evolution of this sector has become a subject of intense discussion amidst technology and financial sector. It is a type of industry which provides easy and affordable loans to small businesses, startups, SMBs, higher education students, mortgages such as housing loans, car loans, etc., small ticket borrowers, new to bank people and under-banked customers, etc.
In the year 2016-17, internet penetration increased from 20% to 30%. Also, the use of digital transitions has increased by 55%. The increased use of digital lending has benefitted both lenders and customers. The lenders can check more information of the potential customer and the customers can surf online and gather more information of the lender’s reputation in the market, what are the types of limits for the loan they provide, etc. also borrowers can choose from a vast range of alternative lenders available online.
The alternative lending platforms computes the credit score of the borrower on the following basis;
Moreover, alternative lending is becoming a preferred source of funding for SBO because of the advantages and benefits it carries. Also, the industry experienced a major boom in the year 2017 due to demonetization drive that took place in the last quarter of 2016.
Furthermore, in the same year, approximately 225 alternative lending companies was founded in India. It is the second most funded industry. Also, it is one of the fastest-growing industries in India currently. The considerable reason for why it opts and majorly preferred by small businesses is because it involves less risk than banks and NBFCs and also offers customized/personalized services according to the customer’s needs.
The alternative lending industry has achieved numerous milestones in recent years. Additionally, it also became one of the preferred money lending options for small and medium business owners, startups, etc. Also, these platforms give loans to higher education students and they also provide car and house loans against mortgages. The major benefit of this industry is that they give loan to people or businesses that due to certain reasons are not able to get loans from traditional sources.