8 Best Alternative Business Loans

Alternative business loans offer flexible credit requirements, easy online applications, and quick access to funds for small business owners that don’t qualify for traditional financing. Alternative business funding encompasses several financing solutions, including short-term working capital, long-term equipment, inventory, and real estate financing.

8 Alternative Business Funding Options

Best for working capital: BlueVine
Best for minor expansions: StreetShares
Best for slow paying customers: FundThrough
Best for inventory financing: Paragon Financial
Best for high credit card receivables: National Funding
Best for high growth SaaS startups: Lighter Capital
Best for new or used equipment: SmarterFinance USA
Best for short-term real estate financing: Visio Lending

1. Short-term Business Loans

Short-term business loans provide quick funding up to $500,000. They are easier to qualify for, can get funded more quickly, and have shorter repayment terms than term loans. Repayment terms for short-term business loans range from three to 36 months, and their annual percentage rates (APRs) range from 10% to 100%.

Who a Short-term Business Loan Is Right For

Short-term business loans are a good option for businesses with less than perfect credit, in need of money fast, and the ability to repay the loan quickly. You can often receive these loan funds in as soon as one business day to cover things like inventory needs or to make a seasonal payroll payment.

Short-term Business Loan Rates & Terms

Loan amounts: $2,000 to $500,000
Time to funding: As soon as one business day.
Expected APR: 10% to 136%
Origination fees: Up to 6%
Repayment term: Three to 36 months

Short-term Business Loan Qualifications

Time in business: At least one year
Annual business revenues: At least $25,000
Credit score: At least 550

How to Apply for a Short-term Business Loan

The entire application process for a short-term business loan can occur online. Many lenders will connect with your business bank account or accounting software to speed up the approval process. You can often receive loan approval in a matter of minutes and receive loan funds in as soon as one business day.

Best Short-term Business Loans

2. Business Term Loans

Business term loans have repayment terms between one to five years and carry interest from 10% to 40% APR. These loans require a better credit score, higher revenues, and longer time in business than short-term loans. However, they also have lower APRs, longer repayment terms, and lower monthly payments.

Who a Term Loan Is Right For

If your business has grown past the startup phase, a term loan could be a great option. A term loan often has a lower APR and longer repayment term―one to five years―than a short-term business loan. These loans are a good way to finance equipment or growth capital for your business.

Term Loan Rates & Terms

Loan amounts: Range from $5,000 to $500,000
Time to funding: Takes about one week to fund
Expected APR: 10% to 40%
Origination fees: Up to 9%
Repayment term: One to five years

Term Loan Qualifications

Time in business: At least one year
Annual business revenues: At least $25,000
Credit score: At least 600

How to Apply for a Term Loan

Business owners can apply for a loan online through a lender’s website. You can prequalify for these loans in a matter of minutes and have the full application for the loan submitted in less than an hour. Approval occurs within two to three business days, and lenders usually make funding available within a week.

Best Business Term Loans

3. Invoice Factoring

Invoice factoring provides quick funding for businesses with business-to-business (B2B) or business-to-government (B2G) customer invoices. This financing option converts invoices due in 30, 60, or 90 days into immediate cash for your business, with roughly 80% of the invoice paid upfront. The remaining 20%―minus fees―is funded once the invoice is paid.

Who Invoice Factoring Is Right For

Invoice factoring can be a great option for businesses that have outstanding invoices with business-to-business (B2B) or business-to-government (B2G) customers and need immediate financing. It can also be a good solution for those business owners with less-than-perfect personal credit as invoice factoring relies more heavily on the creditworthiness of your customers than on your personal credit.

Invoice Factoring Rates & Terms

Loan amounts: Up to $25 million, depending on the value of the sold invoices
Discount rate: 0.25% to 0.7% per week
Time to funding: Get funds in one to three business days
Repayment term: 12 to 24 weeks, or as your customer repays invoices

Invoice Factoring Qualifications

Time in business: At least three months
Invoices: B2B or B2G invoices due in less than 90 days
Credit score: At least 530

How to Apply for Invoice Factoring

Many invoice factoring companies will connect to your accounting system to analyze your outstanding invoices and determine which will qualify for potential financing. You then choose which invoices you’d like to include in the advance from the invoice factoring company. With invoice factoring, you can get funded in as soon as one business day.

Best Invoice Factoring Companies

4. Online Inventory Financing

Online inventory financing is a line of credit used to purchase inventory. The loan can be secured with existing inventory, inventory being purchased, or sometimes with other business assets. Inventory financing is cheaper than other short-term loan options, making it one of the best small business loans for retail businesses.

Who Online Inventory Financing Is Right For

Online inventory financing can be used for startup business loans to acquire inventory, or for retail businesses needing funding to increase their inventory. These loans can be used by retail or wholesale businesses looking to increase inventory amounts and may be used to purchase seasonal inventory to prepare for an upcoming busy period.

Online Inventory Financing Rates & Terms

Loan amounts: Up to $500,000
Time to funding: One week
Cost of capital: 1.25% to 3% of advance for every 30 days of repayment
Repayment term: One to six months

Online Inventory Financing Qualifications

Time in business: At least one year
Business income: Positive
Personal credit: At least two years of personal credit history

How to Apply for Online Inventory Financing

Business owners can complete an inventory financing application online via the lender’s website―some lenders may require additional account setup―within minutes and can be approved in as soon as one business day. There are no formal requirements beyond the normal personal and business information provided to the lender in the application.

Best Inventory Financing Options

5. Merchant Cash Advances

Merchant cash advances (MCAs) are not small business loans but are advances on your business’s future credit card receipts. The merchant cash advance provider issues you an advance and collects a percentage of your daily credit card receipts as repayment. This can be an expensive form of financing. However, it can get you funded quickly.

Who Merchant Cash Advances Are Right For

While merchant cash advances are an expensive option for business financing, they can be useful for some businesses. MCAs are often used by small businesses that could not find other short-term financing, need faster funding than they could get through a working capital loan, or don’t meet the qualifications for United States Small Business Administration (SBA) Express loans.

Merchant Cash Advance Rates & Terms

Loan amounts: Most providers will lend 85% to 250% of your monthly credit card sales volume
Time to funding: One to three business days
Factor rate: 1.2 to 1.5 times
Holdback percentage: 8% to 30%

Merchant Cash Advance Qualifications

Annual credit card sales: At least $36,000
Time accepting credit card payments: At least six months
Credit score: At least 500
Additional requirements: Active credit card processor account

How to Apply for a Merchant Cash Advance

The merchant cash advance application is as short as one to two pages, is straightforward, and can be completed online. After submitting your application, you will be asked to provide additional information regarding your credit card sales and business finances. Approval is fast, and you can receive funding within two to five days.

Best Merchant Cash Advance Providers

6. Revenue-based Financing

Revenue-based financing is an alternative business loan where payments are calculated as a percentage of your revenue instead of as a fixed amount. Revenue-based loans are often the best small business loans for businesses with high growth margins because they provide growth capital now for a percentage of your future revenue.

Who Revenue-based Financing Is Right For

Revenue-based financing is for high growth businesses with 50% or more margins, like software-as-a-service (SaaS) companies. Most times, your business will need to have a subscription-based revenue model or a steady and predictable recurring income stream. This type of small business lending is often used as an alternative to seeking venture capital or equity investors.

Revenue-based Financing Rates & Terms

Loan amounts: $50,000 to $3 million, but not over three times to six times your monthly revenue
Total cost of capital: 1.3 to three times
Repayment: Monthly payments based on a fixed percentage of your monthly revenue (3% to 8%)
Time to funding: Takes three to four weeks

Revenue-based Financing Qualifications

Monthly revenue: At least $15,000
Gross profit margin: At least 50%
Predictable revenue: Subscription-based or other recurring monthly revenue

How to Apply for Revenue-based Financing

The online application can be completed within minutes. You will speak with a representative by phone to review your funding needs. The provider will connect to your bank accounts to analyze bank statements and verify your revenue. Once verified, your loan application goes to underwriting to determine total loan amounts and initial repayment terms.

Best Revenue-based Financing Options

7. Equipment Financing

Equipment financing can be used to purchase equipment, vehicles, or machinery. The minimum credit score requirement for equipment financing can be much lower than for term business loans with a similar term. Equipment financing can be structured as an equipment lease instead of a loan, which can give you added flexibility in your monthly payments.

Who Equipment Financing Is Right For

Equipment financing is a good option for businesses needing to purchase equipment, vehicles, or machinery. It can be utilized as startup business loans for equipment purchase because the equipment serves as collateral. Equipment financing can also be useful for businesses wanting to claim equipment depreciation on their business tax returns.

Equipment Financing Rates & Terms

Loan amount: Up to $1 million
Interest rate: Starting at 6%
Repayment term: Two to five years
Down payment: 0% to 20%
Time to funding: Typically less than one week

Equipment Financing Qualifications

Proof of business existence: Lender will require documentation that you are operating a legal business
Loan purpose: Loan proceeds must purchase equipment, vehicles, or machinery
Credit score: At least 620

How to Apply for Equipment Financing

Applying for equipment financing can often be done online. Once preapproved, the lender will determine how much it can be lent to you based on your credit, company history, and how well the equipment holds value.

Best Equipment Financing Companies

8. Hard Money Loans for Small Businesses

A hard money loan can help real estate investors buy residential or commercial real estate. It can also obtain working capital for a business by using your personal or commercial real estate as collateral to back the loan. Hard money loans have short repayment periods and can be expensive.

Who Hard Money Loans Are Right For

Hard money loans work well for borrowers who have real estate assets that they can leverage as collateral but may not qualify for a traditional loan. Hard money loans allow you to draw equity off your real estate, which can fund other business needs as you wait for your property to sell.

Hard Money Loan Rates & Terms

Loan amounts: Generally up to 75% loan-to-value (LTV)
Time to funding: 15 to 30 days
Interest rates: 5% to 13%
Loan term: One to three years
Origination fees: 1.5% to 10%
Closing costs: 2% to 5%

Hard Money Loan Qualifications

Credit score: At least 550
Debt-to-income ratio: Less than 35%
Real estate experience: May be required by your lender

How to Apply for a Hard Money Loan

In most cases, you can begin the application process online via your lender’s website. After you fill out an application and provide the necessary documentation, the lender will order a property appraisal to determine the amount of the loan you are eligible for based on the property’s value. The approval process typically takes two to three weeks.

Best Hard Money Lenders

Bottom Line

Alternative business loans can be a great option when traditional lenders can’t lend to you or can’t get you the funds quickly enough. It can also be a good option if you’re looking for a simpler application process and willing to pay a little extra for the convenience.