Comparing Traditional Banks and Alternative Lenders for Equipment Financing
When it comes to getting an equipment loan for your business, you have a variety of options. In addition to the traditional banks you may already be aware of, online and other alternative lenders exist to specialize in certain types of financing and fill gaps in the market. In this article, we’ll explain the differences between traditional banks and alternative lenders so you can compare the two.
What are traditional banks?
Traditional banks are generally considered to be financial institutions with a physical branch presence. This includes bigger national and regional banks, as well as smaller community banks.
What are alternative lenders?
Alternative lending means anything that’s not a traditional bank. This includes online lenders, peer-to-peer lending, and specialty equipment financing lenders like Blue Bridge Financial.
The Application and Approval Process
Learn how traditional banks and alternative lenders handle the application process.
Whether a national or community bank, traditional financial institutions have a more rigorous and time-consuming application and underwriting process before getting to an approval.
When applying for an equipment loan from a traditional bank, you will usually need to submit comprehensive documentation such as a detailed business plan, credit score and history, and financial statements.
Alternatives to banks, such as lenders that only specialize in equipment financing, typically offer a more streamlined online application process. For example, Blue Bridge offers fast approvals in less than 4 hours and same-day funding. This is helpful to businesses who need to get equipment quickly.
Alternative lenders are also usually on the cutting-edge of technology. They may utilize alternative data and technology-driven algorithms for risk assessment, potentially allowing for quicker decision-making. At Blue Bridge, our simplified application and approval process helps us get you the funding you need within 24 hours.
Loan Qualification Criteria
Learn how loan qualification can differ with traditional banks and alternative lenders.
Traditional financial institutions generally have strict qualification criteria for commercial loan approval. They look for strong credit histories and proven financial track records, often prioritizing established businesses or business owners with robust financial profiles. This can make it harder for start-ups and businesses with different cash flow situations to get funding.
Alternative lenders are often founded to fill a gap in the market. They are able to give individual consideration for every client, including businesses that can’t get funding from traditional banks. For example, at Blue Bridge Financial, our financing decisions are based on the unique needs and circumstance of each client. We say “yes” more often and more quickly than other lenders because of the personal oversight of each application.
Loan Products and Flexibility
How much variety and flexibility can you find with traditional banks vs. alternative lenders?
They usually offer a wide range of business deposit accounts, loans, and other services, but banks may have less flexibility in their loan terms and structures. However, they may offer lower interest rates due to their access to cheaper capital.
They frequently provide more tailored and innovative loan products, offering flexibility to meet specific business needs or industry demands. However, they may charge higher interest rates or fees to offset the potentially higher risks they incur. At Blue Bridge Financial, we always strive to offer you competitive rates and we provide clear, understandable terms and rates with no hidden surprises.
Where will you find the type of customer experience you’re looking for?
Businesses can find a “one-stop shop” in traditional banks. From checking and savings accounts to commercial loans, digital banking services, and sometimes even insurance, traditional banks also offer in-person branch service.
Because they tend to focus more narrowly on specific financial products, alternative lenders can offer specialized expertise and excellent customer service in particular areas. They often leverage digital platforms to enhance customer convenience, providing services like an online application, account management, and customer support. When you work with an experienced equipment lender like Blue Bridge Financial, you benefit from our national presence, wealth of experience, one-on-one support with a knowledgeable specialist, and more.
Risk Appetite and Focus Areas
If you have a newer business, or your finances are less than perfect, you may be looking for a lender with a higher risk tolerance.
Traditional banks are generally conservative, with a lower risk appetite due to regulatory constraints and their fiduciary responsibilities to stakeholders. This is why they tend to prioritize larger, more established businesses and industries.
These commercial lenders tend to have a higher risk tolerance, often focusing on niche markets or underserved customer segments, such as small businesses, startups, or businesses with fluctuating incomes. At Blue Bridge Financial, we’re proud to have served over 8,000 small businesses and provided $500 million in funding since our inception.
About Blue Bridge Financial
When it comes to equipment financing solutions, one size doesn’t fit all! Blue Bridge Financial is dedicated to helping businesses obtain the equipment financing they need, quickly and flexibly. We’ve funded over 9,000 businesses in 30+ industries and we can customize an equipment loan to meet your financing needs. Contact us today!