How Does FaaStrak Compare to a Direct Lender?
What is a direct lender?
Direct lending is a form of funding where lenders loan money directly to businesses without the use of a broker or other intermediaries. Essentially, there is no middleman. So, instead of going to say, FaaStrak, to find a loan, you’d go directly to the lender. A direct lender will decide whether or not an applicant qualifies for funding, and then hand over the money if they do. An intermediary, however, will help with identifying the best lender, along with getting together all the information they’ll need to present to the lender.
A direct lender can offer many different financial products and can be large financial institutions like banks (Bank of America, Wells Fargo, etc.), or they can come from the lending marketplace of online lenders. Investopedia says that applying to direct lenders can be a bit like applying to college. Applicants try the one with the best rate available, then apply to a backup, just in case the first one doesn’t work out.
But Are Direct Lenders Helpful?
There are some perks to going through a direct lender, especially if your customers have an already-established relationship with one. If they’ve gotten several bank loans in the past, sometimes it’s easy to gain a relationship with a lender and get perks from already having an account with them. This isn’t an uncommon practice, but often it takes time to establish a relationship with a lender, and most new businesses don’t have that privilege.
What are the Downsides to Direct Lending?
However, there are also several downsides to direct lending, including the fact that it doesn’t let your customers easily compare multiple lenders. When they go directly to a lender, they have to fill out all the paperwork, but can only apply to one loan at a time. There aren’t any options – they tell them if they’re approved or not, and then the lender either hands over the money or they don’t. They only offer you their rates and terms, without comparing them to other lenders.
There’s also the fact that direct lenders require customers to fill out tons of paperwork and sort through documents just to apply to a single product. If they want to apply for several direct loans, they have to repeat this process for every lender. If they want to compare rates and terms, they’ll have to apply to several direct lenders. This takes up precious time that could be used to do actual business, or get other important matters done.
How Does FaaStrak Compare to Direct Lenders?
FaaStrak is fast. We only have one application, and after it’s filled out, your customers can see all of their options – they don’t have to repeat the process for each lender. When they go through a technology-driven, software-based intermediary like FaaStrak, they get to, as they say, “shop” for loans. This ability to look through multiple options and automatically see their options is what sets FaaStrak apart from not just direct lenders, but also brokers.
Brokers often have relationships with certain lenders, and that can inform the choices and options that they give applicants. If they have certain lenders or banks that they favor or do business with often, they’ll often recommend their products more, even if it’s not the best choice for the customer. FaaStrak doesn’t have established relationships with lenders – they’re not paying us to recommend them to your customers. We’re only here to help your customers make the best decisions. We’ll show them all their options, side by side, so they can know what they’ll pay for each option based on their information.
Want to know more about how your customers can go through FaaStrak instead of going to a direct lender? Why not try it out? Sign up with FaaStrak today and get a free demo of what we can do for your company.