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Alternative Lending: Making Small Businesses

Possible Through Alternative Funding

It’s no surprise that both startups and seasoned small businesses have turned to alternative business funding to help them get the capital they need to grow. So many people get rejected for small business bank loans from a traditional institution, with only about 39 percent being successful when taking that route. The number of small business loans (that are less than $1 million) given out by banks has been uneven since the recession, so new forms of alternative lending have evolved to take their place. When you can’t get a traditional small business loan, consider these other options to help your business grow.

Short-Term Business Loans

Short-term business loans are one of the fastest growing alternative finance options among savvy small business owners. Since repayments terms are flexible and typically set up for 12 to 18 months, businesses use short-term loans to accelerate growth quickly. They do not require extensive paperwork and the short-term business loans from BFS Capital can fund in as few as two business days.

Working Capital Loans

Let’s say that you’re running an established institution that’s just had a bad month. When you need funds to cover short-term costs, such as employees’ wages, accounts payable, and operational expenses, you’d get a working capital loan. They are alternative business loans for short-term needs; you wouldn’t use it to buy equipment or long-term assets, just to get you to the next month. Those in the manufacturing industry will often get a working capital loan to cover low months.

Merchant Cash Advances

This is one of the most popular forms of alternative lending available and is built especially for vendors who use credit cards. A business will leverage future credit card sales for a lump sum. Because merchant cash advances take credit card statements rather than credit history into account, they’re a more flexible solution for those who are in a bad credit situation.


These are, for all intents and purposes, just tiny small business loans. They function much the same way but for an average amount of about $13,000 and a maximum of $50,000. They may be easier for a startup company to get, though the processes to apply are often the same.

Lines of Credit

Business lines of credit and small business credit cards, when used wisely, can give a business owner access to cash when necessary, opening up a fluid, flexible line of fast capital that can be used as it’s needed. This alternative business financing option sets up a pre-designated amount of capital a business owner can access when necessary. You don’t pay interest until you actually use the funds. It’s definitely a good idea to rely on this rather than a personal credit card, but you still shouldn’t make late payments on it. Many businesses tap into their lines of credit to address inventory needs or bridge gaps in cash flow.

Equipment Loans

When you have an established business and need to buy big equipment, which can be anything from phone systems to tractors to an oven, you can get an equipment loan specifically to buy that item. They’re often similar to a car loan, though each lender will have different terms.

Invoice Financing

Another way to cover immediate expenses, invoice financing, involves selling your company’s accounts receivable to get working capital. For those with fairly large accounts receivable, it can improve cash flow. Alternative finance lenders will sometimes also call this “invoice factoring” or “accounts receivable financing.”

Peer-to-Peer (P2P) Lending

This is a fairly new type of alternative commercial lending that features getting money from individuals without a bank’s involvement. They’re often small loans, similar to microloans in size, and pull money from several lenders at once. Sites like are examples of P2P lending.


A few years ago, people got very excited about this form of alternative business funding. While the rose-colored glasses may have come off, crowdfunding is still one of the better ways that unique startups can get off the ground. Websites like are particularly great for new ideas, though they can be somewhat of a popularity contest.

Angel Investing and Venture Capitalists

This is the dream of many startups: that someone with a lot of money and enthusiasm will swoop in and invest in their idea because they believe in it. While it’s not as likely as it was perhaps a decade ago, venture capitalists and “angels” can still step in, though networking has to be your strong suit.

Personal, Friends’, and Your Family’s Funds

The last option many people want to lean on is their family’s, friends’, and own savings to help them keep their business afloat, though many people do resort to this if times are tough. If you’re not well-off enough to pay back banks, that’s one thing. But if you’re not well-off enough to pay back alternative lenders, how do you know you can pay back your loved ones or yourself? It’s a big risk.