Alternative Business Loans: 9 Alternative Financing Options for Small Businesses

The term alternative business loans covers a wide range of loan options available to small business owners beyond traditional bank loans. It encompasses everything from short term working capital loans to long term commercial real estate loans. Alternative business loans generally have more flexible credit requirements than traditional bank loans, more convenient applications, and you can typically receive your funds much faster.

Because the options are so varied, which option is right for you, and what terms will accompany that option, will depend on your needs and situation. The table below provides a snapshot of general terms, requirements, and who each option may be right for. We provide a more detailed look at each option after the table.

Alternative Business Financing Options

Alternative Business Loan Options in Detail

Now that you’ve had a chance to see an overview of the alternative financing options in the introductory table, we’re going to take a closer look at each option. We’ll also cover specific lenders where you can go to apply for each type of alternative business loan.

#1 Medium Term Alternative Business Loans

A medium term business loan is generally a loan with repayment terms between 1 and 5 years. These loans require a better credit score, higher revenues, and longer time in business than many short term alternative loans. However, they will also carry a lower APR, longer repayment terms, and lower monthly payments. Medium term alternative business loans can be funded in about 1 week.

Who a Medium Term Alternative Business Loan is Right For

If you’re a strong borrower who’s made it past the startup phase, a medium term loan could be a great option. A medium term business loan typically has a lower APR and longer repayment terms than a short term business loan. This can make the loan more affordable on a monthly basis. These loans can be a good way to fund the purchase of equipment, or to provide needed growth capital for your business over a 1 to 5 year period.

• Loan Amounts
  Loans range from $5,000 to $500,000.
• Time to Funding
  Generally takes about 1 week to fund.
• Qualifications
  You must be in business for a minimum of 1 year, have annual revenues of $25,000+, and have a personal credit score of 600+.
• Application Process
  The application process is completed online and you can prequalify in a matter of minutes, with a full application taking less than 1 hour. You can be formally approved in 2-3 business days, and receive funding in 1 week.
• Documents Needed
  Beyond basic personal and business information you can expect to turn in personal and business tax returns, bank statements, P&L statement, and your current balance sheet.

Medium Term Loan Provider Comparison

Two of the more popular lenders that provide medium term alternative business loans are StreetShares and LendingClub.

StreetShares is particularly great for newer businesses. Not only that, but they are designed to be veteran friendly, providing better alternative lending options to businesses owned by veterans or family members of veterans. LendingClub is another great option for more established businesses that are looking to borrow larger amounts. Each has a very easy online application and can get you funded in around 1 week.

StreetShares vs LendingClub

Maximum Loan Amounts	$5,000 - $100,000	$50,000 - $500,000
Funding Speed	2-3 Business Days	1 Week
Time in Business	1 Year	2 Years
Minimum Credit Score (check your score for free here)	600+	650+
Minimum Revenue	$25,000+	$75,000+
APR	10% - 40%	9.77% - 35.71%
Payback Time Period	3 - 36 Months	1 - 5 Years
Apply Now	Visit StreetShares	Visit LendingClub

For a closer look at medium-term alternative business loans, read our full article here.

#2 Short Term Alternative Business Loans

A short term alternative business loan provides quick funding of up to $500,000. They’re easier to qualify for than medium term loans, can get you funded more quickly, and have shorter repayment terms.

Short term loans typically have a high APR. That said, if you’re going to pay the loan back in less than 12 months, you generally want to focus on the total cost of capital instead of APR. For example, it can be cheaper to pay a loan back in 5 months at a 40% APR than it would be to pay the same loan back in 5 years at a 4% APR.

Who a Short Term Business Loan is Right For

Short term business loans are a good option for businesses that need money fast and can afford to pay the loan back in less than 12 months. You can get funds in as little as 1 business day to cover things such as inventory needs or to make a seasonal payroll payment. This is often an option for borrowers without a good credit score as well.

• Loan Amounts
  Generally range between $2,000 and $500,000.
• Time to Funding
  As quick as 1 business day.
• Qualifications
  You must be in business for a minimum of 9 months, with at least $50,000 in annual revenues, and your personal credit score must be above 500.
• Application Process
  The entire application process can occur online. Many lenders will connect with your business bank account, or accounting software, to speed up the approval process. You can receive approval in a matter of minutes, and be funded as quick as 1 business day.
• Documents Needed
  You can expect to turn in basic business and personal documents in addition to allowing the lender to connect to your business bank account or accounting software.

Short Term Loan Provider Comparison

Two popular options for short term loans are Kabbage and OnDeck. We recommend OnDeck as a great option for businesses with more than $75,000 in annual revenues. If you business earns less than $75,000 per year, we recommend Kabbage.

Kabbage vs OnDeck

Maximum Loan Amount	$5,000 - $500,000	$2,000 - $150,000
Funding Speed	1 - 3 Business days	1 - 3 Business days
Time in Business	1 Year	1 Year
Minimum Credit Score (check your score for free here)	550+	550+
Minimum Revenue	$100,000+	$25,000+
APR	30% - 50%	40% - 80%
Payback Time Period	3 - 36 Months	1 - 12 Months
Apply Now	Visit OnDeck	Visit Kabbage

In addition to OnDeck’s short term business loan, both lenders offer a business line of credit that can fund larger amounts than a business credit card. Learn more about the best short term business loan providers through our in-depth review of the top lenders in the space.

#3 Invoice Financing

Invoice factoring and invoice financing provide quick funding for businesses with B2B or B2G customer invoices. This alternative financing option converts invoices due in 30, 60, or 90 days into immediate cash for your business with roughly 80% of the invoice paid up front. The remaining 20% (minus fees) is funded once the invoice is paid in full.

Who Invoice Financing is Right For

Invoice financing can be a great option for businesses who have outstanding invoices with B2B or B2G customers and need immediate financing. It can also be a good solution for those business owners with poor personal credit, as it relies more on your customer’s creditworthiness, and less on yours.

• Loan Amounts
  Up to $10,000,000, depending on the value of the sold invoices.
• Time to Funding
  Get funds in 1 to 3 business days.
• Qualifications
  You can qualify for invoice financing if you have creditworthy B2B or B2G clients with outstanding invoices that are due in less than 90 days.You must be in business for a minimum of 1 month, and have a minimum personal credit score of 530.
• Application Process
  Many invoice financing companies will connect directly to your accounting system to quickly analyze your outstanding invoices and determine which will qualify for financing. You then pick which invoices you’d like to factor. With invoice financing, you can get funded in as little as 1 business day.
• Documents Needed
  Beyond basic personal and business information, you can expect to provide up to 3 months of bank statements, a current A/R aging report, or allow the lender direct access to your accounting system.

Invoice Financing Company Comparison

Two invoice financing lenders we recommend are Fundbox and BlueVine. BlueVine is great for businesses seeking at least $25,000 in funding. BlueVine can offer lower invoice factoring rates, and can work with new businesses. Fundbox can be a match for businesses seeking anywhere from $500 – $100K in funding.

Fundbox vs BlueVine

Maximum Loan Amounts	$500 - $100,000	$5,000 - $500,000
Funding Speed	1 - 3 Business days	1 - 3 Business days
Time in Business	6 Months	Startups can qualify
Minimum Credit Score (check your score for free here)	N / A	530+
Minimum Revenue	Need outstanding B2B invoices	Need outstanding B2B invoices
APR	Averages ~45%	Averages ~40%
Payback Time Period	Typically within 90 days	Typically within 90 days
Apply Now	Visit FundBox	BlueVine

Invoice financing can be a great alternative source for working capital. There are also specialty lenders that cater to specific industries. For example, Payability provides affordable invoice financing to Amazon Sellers (read more here). If you’d like to learn more about the best invoice factoring companies, read our in-depth review.

#4 Revenue Based Financing

Revenue based financing (sometimes called royalty based financing or RBF) is a loan where repayments are calculated as a percentage of your business’s revenue instead of as a fixed amount. A revenue based loan gives you growth capital now in exchange for a percentage of your future revenue.

Revenue based loans are highly customized to your business’s situation. Each RBF provider will set different standards based on your revenue and your growth opportunity. The terms and qualifications we discuss below are general guidelines.

Who Revenue Based Financing is Right For

Revenue based financing is generally for high growth businesses with 50%+ margins, like SaaS companies. In many cases, your business will need to have a subscription based revenue model, or a steady and predictable recurring income stream. It is often used as an alternative to seeking venture capital or equity investors.

• Loan Amounts
  $50,000 – $1,000,000, but not more than 3x – 5x your monthly revenue.
• Time to Funding
  Generally takes 3 – 4 weeks.
• Qualifications
  You must be generating revenue of at least $15,000 – $30,000 per month. You can typically qualify if your gross margins are 50%+, and you have predictable recurring revenue like customer subscriptions.
• Application Process
  The application can be completed online within minutes. Then you’ll speak with a representative by phone to review your business model and funding needs. The provider will then connect to your bank accounts directly and analyze bank statements to verify your revenue. Once everything is verified your loan application goes to underwriting to determine total loan amounts and initial repayment terms.
• Documents Needed
  You will provide basic business and personal information, bank statements, and submit to a personal credit check.

Revenue Based Loan Provider Comparison

Two popular options for high growth SaaS companies to obtain a revenue based loans are Lighter Capital and Rock and Hammer Ventures. Lighter Capital generally funds slightly faster, and has lower monthly revenue requirements, but Rock and Hammer Ventures may fund larger loan amounts if your revenues are higher.

Lighter Capital vs Rock and Hammer Ventures

Maximum Loan Amounts	$2,000,000 or 1/3rd of your annual revenue (Up to $500K pre tranche)	$100,000 - $1,000,000, up to 3 - 5x MRR
Funding Speed	3 - 4 Weeks after application	Less than 30 days
Minimum Revenue	$15k per month	$30k per month
Gross Margin Required	50%+	50%+
Minimum Credit Score (check your score for free here)	N / A	N / A
APR	N / A	N / A
Total Cost of Capital	1.3x - 2.2x Loan amount	1x - 1.5x Loan amount
Payback Time Period	Up to 5 Years	Up to 4 Years
Apply Now	Visit Lighter Capital	Visit Rock and Hammer Ventures

If you are interested in learning more about revenue based financing you can read our detailed analysis here.

#5 Online Inventory Financing

Online inventory financing is a line of credit, or short term loan, that is used to purchase inventory. The loan can be secured with existing inventory, the inventory being purchased, or in some cases with other business assets. Inventory financing is generally cheaper than other short term loan options.

Who Online Inventory Financing is Right For

Online inventory financing can be a great option if you have inventory needs immediately and can’t wait or qualify for a traditional bank loan, which can take up to 3 months to fund. These loans can be used by retail or wholesale businesses looking to increase inventory amounts quickly. Online inventory financing may be used to purchase seasonal inventory to prepare for an upcoming busy period.

• Loan Amounts
  As much as $500,000.
• Time to Funding
  Get funds as quick as 1 week.
• Qualifications
  The business must be a U.S. based business, have a bank account, and the owner must have a social security number.
• Application Process
  The application can be completed online within a few minutes, and you can be approved as quick as a 1 business day. Kickfurther’s process involves setting up an online profile to pitch your business to their community of backers. You set the loan amount, and what terms are acceptable to your business. Once the listing closes, if the full amount has been backed by the community, then you can receive your funds as quick as 1 week.
• Documents Needed
  There are no formal requirements beyond the normal personal and business documents.

Online Inventory Financing Loan Provider Comparison

Kickfurther and Behalf are two popular lender options for online inventory financing. Kickfurther is a marketplace where inventory financing is given to small businesses by investors to specifically purchase inventory. Behalf offers a credit line up to $50,000, which you can qualify for in minutes, that can be used to purchase inventory

Kickfurther vs Behalf

Maximum Loan Amount	You request amount, up to 25% of annual revenue.	$50,000
Funding Speed	7 - 10 Days after listing closes.	1 Day
Time in Business	At least 1 successful production run, and your inventory has a shelf life of at least 1 year.	Startups can qualify
Minimum Credit Score (check your score for free here)	N / A	N / A
Minimum Revenue	N / A	N / A
APR	You set, ~20% - 30%	~30%
Payback Time Period	6 Months	6 Months
Apply Now	Visit KickFurther	Visit Behalf

If inventory financing sounds like the right alternative financing option for your small business, read our full reviews of Kickfurther and Behalf.

#6 Merchant Cash Advances

Merchant cash advances are loans that are based on your business’s credit card receipts, rather than more traditional factors, like your credit score. This is a very expensive form of financing, however it can get you funded quickly. Plus, repayment of the loan fluctuates with your credit card sales.

Who Merchant Cash Advances are Right For

Merchant cash advances can be a good option for borrowers with a bad credit score, those with tax liens or a bankruptcy in the last 3 years, or those with lots of outstanding debt. This is often a last option for many small businesses, due to the high costs.

• Loan Amounts
  Most providers will lend 85% – 250% of your monthly credit card sales volume.
• Time to Funding
  Get funds in as little as 2 business days.
• Qualifications
  You must generally have a minimum of $2,500 in monthly credit card sales, been in business for 3 months, and have a credit score of 500+.
• Application Process
  You can apply online within a few minutes and allow the provider to connect to your business account to determine the value of your credit card receivables.
• Documents Needed
  The documentation is simple and consists primarily of recent tax returns, recent merchant credit card statements, and recent bank statements.

Merchant Cash Advance Loan Provider Comparison

Two popular options for obtaining a merchant cash advance are Credibly and National Funding. Rapid Advance can be a great option providing larger funding amounts with less difficult qualifications. National Funding provide merchant cash advances as well as other loan products.

Credibly vs National Funding

Loan Amounts	$5,000 - $250,000	$5,000 - $250,000
Funding Speed	2 Business Days	1 Business Day
Time in Business	6 Months	6 Months
Minimum Credit Score (check your score for free here)	None	500+
Min. Monthly Credit Cards Sales	$15,000 in total monthly revenue	$3,500
APR	N / A	50% - 80%
Payback Time Period	N / A	4 - 12 Months
Apply Now	Visit Credibly	Visit National Funding

If merchant cash advances seem like the right alternative loan for your small business, read our in-depth review of the best merchant cash advance providers.

#7 Equipment Financing

Equipment financing can be used to purchasing equipment, vehicles, or machinery. The minimum credit score requirement for equipment financing can be much lower than for medium term business loans with a similar term. Equipment financing is generally 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 generally a good option for businesses that need to purchase equipment, vehicles, or machinery. Even startups can qualify for equipment financing, because the equipment serves as collateral. This can also be a great match for you if you currently have debt but do not want to refinance that debt in order to purchase equipment.

• Loan Amounts
  Up to $1,000,000+ in many cases.
• Time to Funding
  Typically 1 -3 weeks
• Qualifications
  You must have a credit score of 600+, and be able to show proof of your business’ existence. Loan proceeds must be used for equipment, vehicles, or machinery.
• Application Process
  The first step is to fill out an application, often online, and then allow the lender to perform a credit check. You should know whether you have been pre-approved, or if the lender needs more information, within 1 business day. Once you’re pre-approved the lender will determine how much can be loaned to you based on your credit, company history, and how well the equipment holds value.
• Documents Needed
  You will provide basic personal and business information, and can expect the lender to focus on both personal credit history and the history of the business.

Equipment Financing Company Comparison

Smarter Finance USA and National Funding are two popular options for those seeking equipment financing. National Funding is good for those with high credit scores and larger financing needs, while Smarter Finance USA has more flexible credit requirements and can lend to newer businesses.

Smarter Finance USA vs National Funding

Maximum Loan Amounts	$250,000	$150,000
Funding Speed	As Fast as 24 hours	As Fast as 24 hours
Time in Business	Startups can qualify	6 months
Minimum Credit Score (check your score for free here)	600+	620+
Down Payment	5%	No down payment or collateral required
APR	Starting at 6%	Starting at 8%
Payback Time Period	Up to 5 years	2-5 years
Apply Now	Visit Smarter Finance USA	Visit National Funding

If you think equipment financing might be the right alternative funding option for your small business, use our equipment financing calculator to estimate your monthly payments.

#8 Hard Money Loans

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

Who Hard Money Loans are Right For

Hard money loans can be used by borrowers who have assets they can leverage, like someone doing their first fix and flip project, but generally do not qualify for more traditional lending options.

• Loan Amounts
  Generally up to 75% LTV.
• Time to Funding
  Funds in about 1 month.
• Qualifications
  To qualify for a hard money loan you must have a credit score of 620+, have no recent foreclosures or bankruptcies, and your debt-to-income ratio must be less than 35%.
• Application Process
  After you fill out an application with the lender, and provide the required documentation, the lender will then order a property appraisal to determine the amount of the loan. The approval process typically takes 2 – 3 weeks.
• Documents Needed
  Real estate hard money lenders may require 3 – 6 months of bank statements, personal and business tax returns, repair estimate, property contract of sale, company balance sheets, P&L statements, and a property appraisal.

Hard Money Loan Provider Comparison

South End Capital and RCN Capital are leading hard money lenders. Both RCN Capital and South End Capital provide hard money loans nationwide, which is not always the case with other hard money lenders. After a review of a number of national lenders, both RCN and South End Capital were in our top 3 recommended lenders, with South End Capital earning our top recommendation.

South End Capital vs RCN

Maximum Loan Amounts	$2,000 - $5,000,000	$100,000 - $2,500,000
Funding Speed	2 - 4 Weeks	2 - 4 Weeks
Loan-to-value	Up to 80% LTV	Up to 70% LTV
Minimum Credit Score (check your score for free here)	580+	650+
Down Payment	Varies	Varies
APR	8% - 13%	9% - 12%
Payback Time Period	1 - 25 Years	6 - 24 Months
Apply Now	Visit South End Capital	Visit RCN Capital

If you want to take a closer look at our complete review of these hard money lenders, read our full article here.

#9 Peer-to-Peer Real Estate Financing

Peer-to-peer real estate financing is offered by online lenders who are leveraging technology to make quick credit decisions. This option leverages the use of individual investors to widen the net of opportunity for borrowers, and the process is completed entirely online.

Who Peer-to-Peer Real Estate Financing is Right For

Peer-to-peer real estate financing is often used for residential fix and flips, but can also be used to buy commercial real estate. This option is for borrowers with at least 1 profitable flip under their belts and who have a good personal credit history. Peer-to-peer real estate financing can be a great match for you if you need funding for a residential investment quickly and do not need a long-term loan. These fix and flip borrowers may not want to deal with the headaches and paperwork of a traditional banking option.

• Loan Amounts
  Up to 90% LTV.
• Time to Funding
  Peer-to-peer real estate financing can fund within 15 days.
• Qualifications
  You must have a credit score of 650+ and have a debt to income ratio under 50%. You must not have any bankruptcies, tax liens, or foreclosures currently in your credit history. Many lenders require you to have profitably flipped one property.
• Application Process
  The application process occurs entirely online, and you can be prequalified in a matter of minutes. Full approval generally takes 3 – 5 business days.
• Documents Need
  Beyond basic personal and business information you may additionally be required to provide the purchase contract, an estimated sales price, the preliminary title report, a repair estimate, a personal financial statement, and explanations of past projects.

Peer-to-Peer Real Estate Financing Provider Comparison

LendingHome and Patch of Land are popular choices for peer-to-peer real estate financing. Patch of Land offers more flexibility in the loan term length whereas LendingHome is a good short term solution to bridge financial needs for small projects.

LendingHome vs Patch of Land

Maximum Loan Amounts	$100K- $10mm	$100k - $10mm
Funding Speed	Less than 2 weeks	5-7 days
Loan-to-Value	Up to 90% LTV	Up to 80% LTV
Minimum Credit Score (check your score for free here)	550+	550+
Down Payment	N / A	N / A
APR	7% - 12%	7.99% - 13%
Payback Time Period	12 Months	1 - 3 Years
Apply Now	Visit LendingHome	Visit Patch of Land

If you’re looking to finance an investment property or need to move quickly on commercial real estate, read more in our hard money lenders comparison.

The 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 quick 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.

Here’s a summary table of everything we’ve discussed above so you can choose the right financing solution for your situation.

Alternative Business Loans Summary Table