Can Alternative Lending Help Your Business?

There are any number of reasons why you might be turned down for a business loan. It might be that your credit score isn’t great or you don’t have a well-researched business plan. Relatively new businesses make banks nervous because they want a proven track record of success before they make a loan.

But being turned down for a loan doesn’t have to mean the end of your business. There may be other ways to get the funds you need in the time you need it. Here are four types of alternative lending that can get or keep your business on its feet.

  1. Microinvestors and Crowdfunding

Crowdfunding is more like getting donations than a loan. The people giving you money don’t expect a return on their investment. Instead, they usually receive a gift from you, like a free product. Businesses developing creative projects or new technologies do particularly well.

Equity crowdfunding, or micro-investing, is different. These are investors in the traditional sense; they’re buying into your company, just with smaller sums of money than traditional investors. This is one of the fastest-growing sources of alternative lending, especially for small and new businesses. For both types of crowdfunding there are great, online platforms that can help you find people willing to support your business.

  1. Merchant Cash Advance

If you make a fair amount of credit card sales, you might consider looking into a merchant cash advance. Lenders will give you a short-term loan in exchange for a percentage of your future credit card sales. Because they base their decision strictly on credit card receivables, this can be a good option if your credit score isn’t great.

  1. Equipment Sale-Leaseback Financing

If your business owns equipment, especially construction and heavy equipment, you will almost certainly qualify for a form of alternative lending called equipment sale-leaseback financing. This is where you sell your equipment to the lender for cash, and lease it back. You have the cash you need and you still get to use your equipment. The downside is if you default, your equipment is the collateral, so it can be repossessed.

  1. Purchase order financing

If you have client orders that you can’t afford to fill, purchase order financing is a good option. The lender will pay your suppliers, you fill the order, and then the lender collects their money from the customer invoice.

So if you’ve struggled to secure a traditional loan, don’t despair. There are alternative lending sources that can get you the cash you need.