This article clarifies key questions about direct lending providers, including who borrows from them, how to identify direct lenders, and why they have become a popular alternative to traditional banking. It highlights their growth, flexible terms, and importance for small to medium-sized businesses seeking funding amidst banking industry shifts.

Frequently Asked Questions About Direct Lending Services

A direct lending provider is an individual or organization that functions independently of traditional banks, managing all aspects of the loan process internally. This includes reviewing applications, distributing funds, approving loans, and overseeing repayment. In contrast, an indirect lender collects borrower information and submits it to multiple lending institutions or connects clients with third-party lenders for financing.

Who are the typical borrowers for these lenders?
Small and medium-sized enterprises often seek out direct lenders due to limited access to traditional financing. These lenders tend to charge higher interest rates, sometimes 2% above bank rates, reflecting increased risk and urgent funding needs.

How can you recognize a direct lender?
Examine the lender’s website, particularly the footer. If it indicates that a third party manages funding or that your application may be forwarded to another lender, it’s probably not a direct lender.

What makes direct lending a compelling alternative?
Following the post-2008 financial crisis, banks scaled back their lending, paving the way for direct lenders, who raised over $13.3 billion in early 2017 alone. They are now handling larger deals, catering to bigger companies, and offering more flexible terms, making them an appealing option for medium-sized businesses seeking capital.