Bank Loan Alternative Financing

When a bank declines a loan request for your small business, what is the solution? One of the best available options is alternative funding. 

 

Alternative funding, which comes from non-bank entities that specialize in lending funds to small- and medium-sized businesses, exists in several different solutions that allow lenders to create flexible terms for owners who need access to capital for growing businesses. These are some options:

Merchant cash advances

This is a business cash advance program that provides you with a sum of capital by purchasing a set amount of your future credit/debit card sales. Instead of making fixed monthly payments, MCAs work with your natural cash flow, automatically deducting a small percentage from your credit/debit card sales until the cash advance is repaid in full.


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Business loans

These non-traditional loans are designed to make financing accessible to a range of small businesses. Loans in the industry vary in amount. For example, a mom-and-pop shop may need $5,000 or a rapidly expanding business might be looking for $500,000.

Inventory purchase programs

Designed to help small businesses with one of their most critical and basic expenses: inventory. This innovative inventory-financing program lets merchants buy inventory at no upfront cost, while an alternative lender will fund 100 percent of the purchase order.

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Family and friends

Although it isn't considered alternative funding in the standard sense, borrowing money from your family and friends is one of the easiest ways to help business owners receive extra working capital for their businesses. It could be considered the most tried-and-true option available, as owners are dealing with people they know and love, and personal relationships are solidly in place.

The caveat here is that money and personal relationships don't always mix, and it's critical that everyone involved communicates clearly about payment terms and expectations beforehand or else things can get messy.

Personal or business credit cards

In order to get the funding owners need, they can always buy now and pay later by using personal and business credit cards. However, this could have a big impact on credit scores and limits, and while it is a quick fix, it's also one of the riskier options.

Overall, the first three alternative lending options are much safer play than the friends/family and credit card route. You're dealing with proven entities that will work with you and bring a successful track record of helping businesses meet and exceed their goals to the table.

The alternative funding space continues to grow and become accepted by mainstream business. Alternative lenders are filing for IPOs, getting backed by some of the biggest companies in the world, and reaching previously unfathomable highs in the amount of loans being provided to SMBs. American small business sentiment is higher than it has been since before the financial crisis, and the support from alternative lenders has made a significant impact in helping the economy across the country.

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