Alternative and Non-Traditional Lenders

An alternative lender, or non-traditional lender, is a loan provider, often a short-term loan lender that is often not heavily regulated by state or federal agencies. Alternative lenders can be financial, mortgage, or online lenders. Some lenders provide small amounts of cash relatively quickly, while others may loan large sums that take longer to be approved.
Non-traditional lenders that provide large sums of money usually require more documentation than traditional lenders. They may ask for extensive business and personal financial statements, as well as credit reports and business plans. To apply for a large alternative loan, individuals usually have to meet certain requirements: have proof of employment, be employed for a certain amount of time, and have bank statements for a specified time period (usually 12 months).

The interest rates of alternative loans also depend on whether the loan is secured or unsecured. Secured loans typically have lower interest rates than unsecured non-traditional loans because they minimize the lender’s risk of loss. Non-traditional lenders will also look at an applicant’s credit score and down payment on the loan to determine the interest rate. The better the credit score and the larger the down payment, the better interest rate an individual can obtain. The time period to repay a non-traditional loan also depends on the amount of funds provided. Individuals usually opt for short-term loans because it gives them enough time to improve their credit scores and get better loans.

Accounts Receivable Turnover Ratio

The accounts receivable turnover ratio is a type of activity ratio—that is, an indicator of how efficient a company is operating— used to assess a company’s effectiveness in managing its credit policy. The accounts receivable turnover ratio also indicates how quickly credit customers pay their invoices. The accounts receivable turnover ratio is determined by dividing the net credit sales of a company by the average accounts receivable over the same time period. A high accounts receivable turnover ratio is an indication that the company’s collection efforts are well managed and enforced. If the accounts receivable turnover ratio is low, the company’s credit policies may need to be tightened in order to maintain the receipt of revenue from credit sales. The accounts receivable ratio is useful in determining the type of credit to offer customers and which clients should be eligible for an account with your business. There is a big opportunity cost involved with providing credit to your clients. When goods or services are delivered without immediate payment, there is a threshold at which the benefit of the sale loses worth against the need for immediate cash inflows. The accounts receivable turnover ratio can help display this threshold by quantifying the success with which your business conducts its sales and collections program. The accounts receivable ratio is not a tool that reveals decisive patterns or a technique to resolve conflicts. Rather, it is an instrument to help you better understand the model that should be followed to guarantee that accounts receivable are being used to their full potential.