The Alternative Lenders: Proceed With Caution

When banks say no — and they probably will — people turn to alternative finance providers. Asset finance, merchant cash advances, revenue-based lending, peer-to-peer platforms. Some of these are legitimate and useful. Some are predatory.

The alternative lending market exists precisely because banks aren't lending. That means the borrowers coming to these providers are, by definition, the ones the banks deemed too risky. And lenders who specialise in lending to risky borrowers charge accordingly. Interest rates can be eye-watering. Terms can be punishing. Some structures are designed so that you're essentially paying interest on interest, or where early repayment penalties trap you into the full term.

Read every line of every contract. Get independent financial advice. And ask yourself the hard question: if a bank — whose entire business model is lending money — won't lend to you, what does that tell you about your business?