Ditching the ‘Alternative Lending’ Moniker
by: Mike Semanco
As recently as March of this year, I was using the term alternative lending to describe our industry niche - but no more. Moving forward, “alternative” will be removed from our sales, marketing and conversational lexicon. The word alternative generally connotes, outside of the mainstream, not as acceptable as the standard, a secondary when the best option is not available. In an economy of unprecedented credit stress, the asset based lending/factoring industry has earned the legitimacy to take its rightful place as a niche financial lender - not an alternative lender.
Factoring and asset-based lending are time-tested options for small businesses and remain a vital form of commercial lending after 500 years because they have the ability to sustain and grow a company when traditional bank financing does not fit or, in today’s economy, becomes unavailable. Indeed, rather than being an alternative financial option, our industry has shown leadership in many metropolitan credit markets. So, it is safe to say, that in this unprecedented economic climate, what once was considered “alternative” is now mainstream.
Frustrated entrepreneurs and other traditional bank borrowers stymied in their efforts to obtain working capital are welcoming the opportunity to obtain financing through factoring and asset-based lending, finding it to be a credible and a solution-based approach. Our industry has been given a unique opportunity to help small businesses continue to grow and expand despite the more traditional road blocks that stand in their way. They know that it is sometimes not the cost of financing (within reason) but the availability of financing that can make or break a company. As an industry, we need to acknowledge the mainstream role that commercial finance is increasingly playing in small and medium-sized business markets. The lender of last resort reputation can safely and permanently be laid to rest. The ongoing recession has created increased interest within the entrepreneurial community regarding factoring and asset-based lending. As an industry, we should embrace this increased interest and use it as an educational opportunity to remind small business owners that “alternative lending” isn’t so “alternative” any more. Niche financing, like factoring and asset-based lending services will not only help sustain many businesses during a dicey economic outlook, but will be a critical business growth tool long after the current recession ends.
There are no definitive answers as to how long it will be before we see traditional lending back in full force. Despite my faith in the commercial finance industry there is no doubt that it will be for the good of the business world if we resume normal lending patterns soon. In the meantime, commerce must keep moving forward if we are to prevent the collapse of business as we know it - and the niche commercial finance sector is taking up the mantle. There’s no alternative but to celebrate such industry leadership.
