man in front of bags of money, representing alternative lending
Timothy R
By: timothy-ronaldson
Read in 11 minutes

Alternative Lending: 6 Options for Businesses in 2021

While traditional bank loans have always been the most popular source of capital, they have very stringent requirements and are quite hard to get approved for. That’s why many business owners have been using alternative financing in recent years. The alternative lending marketplace, in fact, has seen quite a boom as banks have tightened their lending standards.

Alternative lending truly helps small businesses fund their needs. 

While getting alternative business loans through outlets such as an online lender used to be scary, that’s no longer the case. Plenty of reputable companies provide alternative financing for hard-working business owners who traditional financial institutions turn down.

In this article, we’ll list the best financing options for small businesses that need alternative financing.

Glass jar with money representing alternative business lending

What is Alternative Lending?

Today, the phrase “alternative lending” has come to encompass a wide range of financial products. Basically, an alternative loan is any type of funding offered by a non-traditional banking source.

Why Does Alternative Business Lending Exist?

In the past, small business owners would rely only on traditional bank loans or other funding backed by the Small Business Administration. However, the challenge for many small business owners is they have trouble qualifying for these loans.

But alternative lenders have an amazing advantage: they extend credit to more borrowers than traditional banks do. Why? How? Alternative finance uses technology to its fullest.

Alternative lenders can also offer many more options when it comes to loan terms, repayment options, and other ancillary benefits.

That’s why even business owners who can qualify for bank loans are still seeking out alternative lending sources. Why not give it a go? Complete an application and start growing your business with the capital you need.

hand giving money to other hand representing the best lending companies

Alternative Finance: The 6 Business Financing Options

There are many different types of small business financing options in the alternative lending space. Don’t worry; here are the six main types of alternative lending options available today.

1. Merchant Cash Advance

This type of alternative financing gives businesses cash for future sales made on credit cards. MCAs give businesses the flexibility to collect a large lump sum of cash upfront rather than waiting to collect the money through credit card sales.

The lender will base the loan amount on the business’ daily receipts from credit cards. The business pays the loan back by giving the lender a percentage of its daily revenue from credit cards.

The biggest downside to this alternative loan is the very high-interest rate they carry. Merchant cash advances charge a factor rate, which usually starts at 1.2 and goes as high as 1.5. 

That’s the equivalent of an APR in the triple digits.

Often, MCAs won’t require any credit history since they’re based solely on sales receipts. The total amount of this alternative business lending will depend on how much your credit card sales are.

2. Invoice Factoring

This alternative lending option is similar to merchant cash advances in that a business gets a lump sum paid upfront in exchange for outstanding sales. However, with this alternative loan, the lender will give the business cash for the value of its unpaid invoices at a discount.

There are two main downsides, though. The first is the fee, which can be roughly 10% or more. This means if you have outstanding invoices that total $50,000, you will be paid only $45,000 for them. 

The second downside is the lender will become responsible for collecting the invoices. This puts a third party directly in contact with your customers, which they might not like.

The positive to this type of alternative lending is that they typically don’t require a credit check or credit history. Why? They take actual business sales into account. They also give you cash now to pay for things rather than waiting to collect on the invoices.

3. Business Line of Credit

This type of alternative loan is very similar to a credit card. The lender will extend you a certain amount of credit, and you can draw down on that credit any time you need it.

Some of the downsides of lines of credit are that most lenders will require an extensive credit check. The check will determine your total line and your interest rate. Like credit cards, lines of credit have high-interest rates that can approach 20% or more.

A significant benefit to this type of loan is you’ll only make payments on the amount of credit you use—not the total amount of your credit line. Lines of credit are very flexible in this way.

4. Crowdfunding

Crowdfunding is a trendy option for businesses just starting out or looking to launch a new product, service, or initiative. Using online platforms, borrowers can raise a small amount of money from a wide net of people. 

The business owner would set a funding goal (the amount you want) and market their campaign to prospective investors. Interested investors could contribute to the fundraising goal.

The big downside is crowdfunding campaigns can be very unsuccessful. You have to reach your goal to receive the money you’re seeking. As a result, it’s very incumbent on you to create a marketing campaign about why you need the money.

The best part about crowdfunding is there is no application process with a lender. This is why it’s such a great option for startup businesses.

5. Peer-to-Peer Lending

Peer-to-peer lending is similar to crowdfunding. The big difference is that your funding will only come from one individual in most cases. You will connect directly with a private individual who will lend you money rather than a financial institution of any kind.

Peer-to-peer lenders often charge very high-interest rates because they consider the investment to be high risk. At the same time, this type of alternative lending is popular for startup businesses for the same reason as crowdfunding—there’s no traditional application process. 

6. Online Lenders

Online lenders are one of the best financing options. They are a nice mix of some other alternative lending options and traditional banks. 

In fact, many small business owners consider them the best of both worlds.

Online lenders can offer very attractive loan terms similar to that of traditional banks. But, at the same time, they can offer the flexibility in lending that many alternative lending options do.

These business loan lenders often focus on small business owners. They also tailor their loans to what these borrowers want the most.

That means flexible loan terms, lower interest rates, easy application processes, and ease of repayment.

If this type of lending is what you were looking for, don’t wait any longer to invest in your business. Apply for a loan!

Other alternative financing options:

In addition to the previous options, there are some other alternatives:

  • Angel investors
  • Venture capital funds
  • Grants
  • Mutual guarantee societies

dollars flying around laptop representing alternative lending

Online Lenders are the Best Lending Companies for Small Business Financing

Online lenders often provide the best alternative business loans, and Camino Financial is one of the top online lenders around. 

We offer small business loans from $5,000 to $400,000 with repayment terms of 24 to 60 months and fixed rates.

Our application offers instant quotes (that don’t affect your credit score), the best available rates and terms, membership benefits, and the ability to manage your money online. That’s why we’re one of the best lending companies.

We don’t require extensive credit histories from our borrowers, and we even allow people to apply who don’t have a Social Security number. You just need to have an ITIN!

To get an instant quote, all you have to do is complete a short application form that will only take minutes. Then you only need to share with us information about your business and your finances.

Once you are approved, all you have to do is accept one of the loan terms, and we’ll deposit your funds into your account. 

Portrait of Factory owner representing business financing options

Camino Financial: One of the Best Financing Options

It seems like, nowadays, the best financing options are found in alternative lending. This type of financing is quickly becoming mainstream as small business owners look for more viable options to borrow money. These small business financing options provide many benefits over traditional bank loans.

There are many alternative lending companies, but online lenders are perhaps the best choice. And at Camino Financial, we pride ourselves on offering some of the best small business loans.

We work hard every day to live up to our motto of “No Business Left Behind.” We do that by offering outstanding business funding and business advice and consultation services for all our members.

If you need small business financing, choose one of the best lending companies:

Apply for a business loan!



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