Obtaining the necessary funding you need to start, grow, or sustain your business can feel overwhelming. On top of this, many business owners can find the strict requirements of traditional lenders like banks too slow and restrictive to meet their needs. Thankfully, the world of alternative lending has significantly reshaped the ways in which you can obtain the capital your business needs to succeed.
Whether you’re a small business owner, an aspiring entrepreneur, or simply interested in understanding the financial opportunities available in the market today, this article will explain to you what alternative business lending is, its various forms, and why it might be the best solution for your business.
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What Is Alternative Business Funding?
Alternative business funding refers to business lending practices that take place outside of traditional banking institutions like commercial banks and credit unions. Moreover, alternative business lending encompasses a broad range of lending models and loan types.
Unlike traditional lending, alternative business financing is often categorized by its less stringent approval criteria. Furthermore, their loan application processes are commonly streamlined for quick approvals and funding with no need for a detailed business plan.
For these reasons, alternative lending can be the go-to option if you’re looking to quickly start, grow, or invest in a business. What’s more, you have a variety of alternative funding sources to choose from to find the business finance options that are right for you.
Alternative Funding Sources for Small Businesses
Securing funding for a small business can be essential for ongoing operations, pursuing growth opportunities, and becoming more competitive. Fortunately, if you’re a small business owner (or an aspiring one), you have a variety of alternative funding sources to choose from when looking for the capital you need. Below are some of the most common alternative funding sources for small businesses:
Crowdfunding: Crowdfunding leverages digital platforms such as Kickstarter, GoFundMe, or Indiegogo, to help your business raise money by collecting contributions from pools of online donors. This method can have the dualistic advantage of not only providing capital but also creating a customer base interested in your offerings. Typically, crowdfunding comes in two forms: rewards-based and equity-based. When crowdfunding is rewards-based, donors receive your products or services in return for their donation. When it’s equity-based, donors receive a small piece of ownership in your company.
Invoice Financing (or Factoring): This financing method involves your business selling its accounts receivable (invoices) to a third party (a factoring company) at a discount. With this option, your business gets immediate cash flow, and the factoring company takes on the responsibility of collecting your debt. This option can be valuable if your business has reliable customers, but also cash flow problems due to longer invoice cycles.
Equipment Financing: This is a loan specifically used to purchase business-related equipment (e.g. machinery, vehicles, and technology). The equipment itself serves as the collateral for your loan. That way, if your business fails to repay, the equipment can be repossessed and sold to cover the loan’s cost. Equipment financing can serve as a cost-effective way to obtain the vital tools your business needs without tying up your working capital.
Business Credit Cards: Business credit cards can give you a convenient way to manage expenses while providing your company with a revolving business line of credit. They often come with perks like rewards programs, travel benefits, and introductory 0% APR periods.
Unsecured Loans: An unsecured loan is a type of financing that doesn’t require you to put up any collateral. Approval is often based on your creditworthiness and income rather than your assets.. These loans can be a great option if you lack substantial assets or want to protect your personal property from risk. Unsecured loans also come in many forms including, but not limited to, personal loans, microloans, small business loans, and more.
Common Types of Unsecured Alternative Business Solutions
Just like there are a number of different ways to obtain alternative financing, there are also a number of ways to use it. Alternative lenders commonly offer a variety of funding solutions to business owners, each designed for a specific purpose. Below is a list of non-collateralized funding options that may help your business grow:
Personal Loans: Personal loans can be used for a variety of personal purposes, such as consolidating debt, renovating a home, or other substantial purchases. That said, they can also be leveraged to cover your business expenses.
Microloans: Microloans are small, short-term loans that can also come with lower interest rates. Microloans can be an excellent option if your business is just getting started or lacks a substantial credit history.
Small Business Loans: These loans are specifically designed for small business owners. With a small business loan, you can get financial assistance covering the real estate, office space, supplies, and other essential expenses your business needs to thrive.
Medical Practice Loans: Alternative lenders sometimes offer programs specifically designed for doctors, dentists, veterinarians, and other healthcare professionals. You can use these loans for a variety of purposes, including starting a new practice, expanding an existing practice, or purchasing medical equipment.
Start-Up Loans: These loans refer to financial solutions created to help businesses during their initial start-up phase. They can help cover the initial costs of purchasing inventory, equipment, office space, real estate, and other needs standing in the way of getting your business off the ground.
Franchise Loans: These loans are made for entrepreneurs looking to purchase a franchise. These funds can help you pay the initial franchise fee, equipment costs, and other start-up expenses associated with the brand you’re expanding.
Why Do People Use Alternative Business Funding?
Alternative business loans provide a range of advantages for businesses seeking funding. They offer practical solutions for those who might not qualify for traditional bank loans or require more flexible or tailored options. Here are the key advantages of alternative business loans:
No Stress Over Collateral: Unsecured business loans offered by alternative lenders often don’t require any personal collateral. This is great if you don’t have significant assets to use as security, or simply don’t want to put any of your personal property at risk.
Simple and Fast Applications: Many alternative lenders offer you a convenient and speedy online application process. You can receive a decision much faster than with traditional lenders like banks and credit unions, and get the funding you need in a matter of days, if not hours.
Personalized Service: Instead of impersonal interactions, you can enjoy a more personalized form of customer service from alternative lenders. For example, they can provide you with a dedicated loan advisor to guide you through your application and repayment processes.
Competitive Interest Rates: You’ll find that many alternative lenders can offer competitive interest rates. This is particularly true if you have a strong credit score or your business is performing well.
Customizable Loan Solutions: With a wide variety of loan products available, such as unsecured personal, small business, and start-up loans, you can find the alternative financing solution that works best for your business.
Enjoy Flexibility: You’ll likely find the flexibility of alternative business loans to be a major perk. This flexibility often shows up in the form of credit requirements, flexible fund usage, and adaptable repayment plans.
No Detailed Business Plan Required: Unlike traditional banks, many alternative lenders don’t require a detailed business plan as part of the loan application process. This can speed up your application process and lower the hurdles to funding, especially if you’re a new business or one with a unique business model that doesn’t fit traditional formats.
Use Unsecured Funding Source For Alternative Business Solutions
At Unsecured Funding Source, we specialize in providing alternative business funding to entrepreneurs. All of our financing solutions come with quick pre-approvals, competitive rates, and a simple application process.
Whether you’re looking to buy a franchise or business with our proprietary Jumpstart LoanSM, launch a practice with a Medical Practice Loan, leverage a Small Business Loan, or receive other alternative business funding, we’re committed to finding a flexible financing solution that fits your needs.
Don’t wait to get the funding your business needs! If you’re looking for a fast and flexible way to grow your business, let’s talk. You can reach out to us at 866-475-4254 or apply now online.