Types Of Alternative Financing

Types Of Alternative Financing

Types Of Alternative Financing

When most people consider the idea of borrowing money, whether applying for a grant or a loan or what have you, they generally first consider applying for such a service from their bank. However, sometimes due to adverse circumstances or a general distrust of banks or official lending institutions, people seek alternative financing from other sources, some of them a little less than legal, whether a normal loan or small business loan.Some people in dire need of quick cash, often times because of financial irresponsibility, are simply unable to go to banks who will outright refuse a loan due to their client being too high of a risk. Earlier in history, most banks preferred not to grant small loans because those seeking them were considered to be irresponsible for putting themselves in whatever situation first necessitated a small loan. Needing alternative financing to help cover other debts or expenses depending on their specific circumstances, they will often seek help from a figure who has been around for as long, or perhaps longer than there have been banks: The loan shark.Loan sharks are an unofficial source of alternative financing who will lend money at very high interest rates, often coercing repayment out of their borrowers by means of violence, threats of violence, or blackmail. In the United States, loan sharks first became a popular fixture in major cities during the 19th century, when illegal money lending was a mere misdemeanor and they were able to operate openly out of offices.Those seeking alternative financing would go about signing a contract which, though appearing very official, had no legal binding whatsoever and instead served only as a means for the lender to potentially blackmail their client, if repayment wasn't promptly made. Often by praying on a debtors ignorance of the legality of such alternative financing, or the lack thereof, loan sharks would threaten legal action to coerce repayment, in lieu of more direct violence.As time went on, the legal repercussions of illegal lending became harsher, driving loan sharks toward the more underground criminal element where they would do business with more unsavory types whose debts were more sinister, whether it be gambling, criminal enterprise or other disreputable practices. This gave birth to the image of illegal lender in league with the likes of Cosa Nostra that the typical person conjures when they imagine a loan shark.Today, alternative financing is still a large industry and is in most cases entirely legal, operating in accordance with legal lending procedure and with no threat of violence or blackmail or even negative stigma towards borrowers. They are simply independently owned and operated companies that lend money with terms and conditions that are more specialized and sympathetic than those similar services offered by national banks.

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