Small business owners often face challenges obtaining the alternative capital they need from banks, as they may lack the financial history and business credit score required to secure a traditional business loan. Because of this, many small business owners find themselves looking for alternative funding. Alternative business funding allows small businesses and startups to secure the capital they need to continue and expand their operations outside of conventional business term loans.
Traditionally, banks provide lending services to companies that demonstrate a strong financial history and high credit score. Alternative business loans provide an alternative financial solution by offering capital to businesses that don’t fit these criteria. Big banks are looking for entities that can easily pay back any debt and have enough collateral to cover possible defaults, leaving small business owners out of the picture. One in five small business owners say they’ve had trouble obtaining funding , which can really hurt a business’s ability to finance their operation and increase sales. Frustrated as they face these financial challenges, many small enterprise owners are turning to alternative business lending to obtain the capital they need.
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Alternative business funding is a way to receive financing from lenders and financial companies that are completely separate from banks. They come in the form of direct private lenders, marketplace lenders, and crowdfunding platforms. Alternative financing companies focus on efficiency and financial products that serve the needs of small business owners who don't meet all of the stringent conditions and terms banks require.
Instead of applying for a loan through a bank, customers can apply through online lenders. These alternative business lenders do not have a full banking license, allowing them to serve the market share of small and microbusiness owners who may not have much financial history or reputation.
Some of the most common loan products alternative lenders provide are:
A business line of credit is a fixed amount of money an alternative capital lender can approve a business owner to use. Similar to a traditional credit card, the customer can withdraw or spend any amount up to the limit and only pays interest on the amount borrowed
A merchant cash advance is a lump sum of cash a business receives in exchange for a percentage of their future credit card sales. This alternative financial solution can often come quickly for business owners and is popular among businesses looking for immediate working capital that process high volumes of credit and debit cards
Whether a micro-loan, installment loan, or short-term loan, these alternative financing options were created to serve business owners who need capital in a short period of time. Loans are often used to cover startup costs or to allow businesses to borrow a smaller amount than traditional bank loans allow.
If you run an operation that relies heavily on invoicing, an alternative financing lender can provide invoice financing upfront in exchange for a percentage of your customer invoice payments.
For businesses that do not have a high enough credit score or one at all, a bridge loan allows the applicant to put up an asset as collateral to obtain the capital they need.
An equipment financing loan is unique, in that it can only be used to purchase necessary equipment. The equipment itself is used as collateral for the loan and therefore does not require outside collateral or a personal guarantee.
Working CapitalTransportation Company
Merchant Cash AdvanceBar Restaurant
Line of CreditPPE Wholesale
With the rapid increase of small business owners opting for alternative funding sources rather than traditional products, it’s clear that this newer and more efficient lending model is a viable solution to their financial challenges.
Here are some of the reasons why business owners are turning to alternative funding solutions:
Simple Application Process - There is generally less paperwork than a traditional application and fewer requirements. Sometimes all that is required are bank statements.
Easier Approval - The approval rate for alternative business funding is much higher compared to traditional bank loans.
Faster Approval - Online lenders often have an approval window of 24 hours, whereas traditional banks can take several months to approve an application.
More Flexibility - Alternative funding products offer shorter terms, smaller loan amounts, and allow for more unique methods of obtaining collateral
More Options - From invoice factoring to merchant cash advances, to lines of credit, etc. there are alternative financing options that will suit just about every need.
Apply in as little as 5 minutes and receive alternative capital within 72 hours, or reach out for more help on what loan type is best for your business.