Different Lending Alternatives to Conventional Bank Loans

Whether you’ve been turned down by a bank or just don’t want to deal with all the paperwork, you may be trying to find another way to get funding for your business. There are a number of lending alternatives that modern entrepreneurs are taking advantage of. Your main concern should be finding the type of financing that works best for your company. Once you have a good understanding of that, the right option will likely make itself clear

Online Financiers

Quite a few business owners steer clear of Internet lending, as there are some horror stories of online financial dealings gone wrong. It’s certainly important to research the company you’re borrowing from, and doing that will likely show you that these lenders are a viable source of capital. The loan amounts are smaller than what you’d get from a bank, but that usually makes the processing time shorter and minimizes the competition as well. If you aren’t looking for a huge amount of cash, this can be one of the better lending alternatives.

Merchant Cash Advances

Many business owners learn about credit factoring after they’ve dealt with bank loans and wish they’d known of this option earlier. Companies looking to grow or boost their working capital can use merchant cash advances as a means of getting an advance on their future sales. The factoring company will buy a portion of your expected business, and then repayment will come through a percentage of your daily or weekly credit card sales. This is a loan that almost acts like a factored invoice, and as long as you have the clientele, it’s a good way to increase your cash flow. Since the reimbursement is based on sales, this type of lending also accounts for months when business is slower than others.

Specific Item Financing

While most lending alternatives provide the capital you need, another option worth considering is leasing whatever you had planned to buy. If your plan was to purchase a commercial vehicle or some office equipment, those are items that can be leased and then either returned when the terms expire or purchased outright for a portion of the original cost. While these options don’t help when you need to cover payroll, paying for a lease is a lot like paying back a loan, and it keeps expensive items off your balance sheet.

Banks are the most common source of financing, but that by no means makes them the best option. There are lending alternatives that, when used in the right situation, can be far more helpful than traditional loans.


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