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Why Crowdfunding Means Larger Loans From Alternative Lenders

From left: Russell McLoughlin, co-founder and CTO of Dealstruck, and Ethan Senturia, co-founder and CEO
From left: Russell McLoughlin, co-founder and CTO of Dealstruck, and Ethan Senturia, co-founder and CEOCourtesy Dealstruck

From the New Entrepreneur blog to the halls of Congress, much has been made of the alternative financing startups angling to enter the market. Perhaps too much. “Alternative lending can only be a niche market,” Rohit Arora, chief executive of online lending platform Biz2Credit, told me earlier this week when I was working on a story on big banks’ credit-card lending to small businesses. “It’s high-cost, short-term money, and you can’t use it to replace long-term options.”

Much more useful for most small businesses, said Arora, would be financiers that provide affordable “medium-term” loans that companies can use to build a business, not just use to meet immediate cash flow needs.