Banks and credit unions have always been the tried and true method of securing business financing, and they usually have reasonable rates and loan terms. However, they often have strict requirements to qualify, and the underwriting process can take some time.
Alternative lenders offer a streamlined loan process that allows businesses to access funds more quickly and without such stringent qualifications. Plus, alternative lending opens up a wide variety of loan types that traditional banks and credit unions don’t offer. Compare some of the best alternative lending options to find one that’s right for your business.
Lendio is a marketplace with more than 75 partner lenders and 11 types of loans. Whatever type of business loan you're looking for, chances are it has a solution. Plus, you can compare multiple lenders all in one place. It only takes a soft credit check to prequalify and review your offers. It also offers more traditional loans, but those can take longer and require more extensive documentation.
Loan amount
$1,000 – $10,000,000
APR
Varies by lender
Min. Credit Score
500
Lendio is a marketplace with more than 75 partner lenders and 11 types of loans. Whatever type of business loan you're looking for, chances are it has a solution. Plus, you can compare multiple lenders all in one place. It only takes a soft credit check to prequalify and review your offers. It also offers more traditional loans, but those can take longer and require more extensive documentation.
Pros
Dozens of lenders to compare
11 types of business financing
Can prequalify in minutes with no impact on your credit
Cons
Not all loan options offer fast funding
Some loans require extensive documentation
Has mixed reviews on the BBB and Trustpilot
Loan amount
$1,000 – $10,000,000
APR
Varies by lender
Min. Credit Score
500
Loan term
3 months to 25 years
Requirements
Operate business in US or Canada for 6 months or more, have a business bank account, minimum 520 personal credit score, at least $8,000 in monthly revenue.
Kiva is a crowdfunding platform that provides loans up to $15,000, and it doesn't charge any interest, which is kind of like finding a unicorn. Plus, you don't need a good credit score to qualify, and there aren't any revenue requirements. But you need friends and family to pitch in on the loan, and it isn't as fast as other financing options.
Loan amount
$1,000 – $15,000
APR
0%
Kiva is a crowdfunding platform that provides loans up to $15,000, and it doesn't charge any interest, which is kind of like finding a unicorn. Plus, you don't need a good credit score to qualify, and there aren't any revenue requirements. But you need friends and family to pitch in on the loan, and it isn't as fast as other financing options.
Pros
Doesn't charge interest
No minimum revenue requirements
Loan terms of up to three years
Cons
Requires contributions from friends or family
Loans capped at $15,000
Funding can take a while
Loan amount
$1,000 – $15,000
APR
0%
Loan term
6 months to 3 years
Requirements
Have at least ten friends and family members willing to contribute to your loan, live in the US, ages 18+, not in bankruptcy or foreclosure, not under any liens, not engaged in: multi-level marketing, direct sales, pure financial investing or illegal activities
Unlike most factoring companies, FundThrough advances up to 100% of the value of your invoices. Plus, it can connect with your accounting software to automatically pull the invoices of your choosing, saving valuable time. You can also choose to upload them yourself. FundThrough is also very transparent with its fees and charges a flat rate between 2.75% and 8.25%, with no other fees. There is also no contract or commitment, and opening an account is free. However, invoice factoring is still a fairly expensive form of financing and isn't suitable for all businesses.
Loan Amount
$500 to $10M
Fee for Terms
2.75% to 8.25%
Unlike most factoring companies, FundThrough advances up to 100% of the value of your invoices. Plus, it can connect with your accounting software to automatically pull the invoices of your choosing, saving valuable time. You can also choose to upload them yourself. FundThrough is also very transparent with its fees and charges a flat rate between 2.75% and 8.25%, with no other fees. There is also no contract or commitment, and opening an account is free. However, invoice factoring is still a fairly expensive form of financing and isn't suitable for all businesses.
Pros
Advances up to 100% of invoice value
One flat rate with no additional fees
No contract required
Cons
Only good for B2B businesses
More expensive than many other types of business financing
Doesn't integrate with all accounting systems
Loan Amount
$500 to $10M
Fee for Terms
2.75% to 8.25%
Min. Credit Score
500
Loan Term
1 day - 61+ days
Requirements
At least $100k in accounts receivable to one customer, invoice B2B or government agencies, invoices are for completed work, no construction or real estate, no explicit liens on receivables
National Funding provides up to $150,000 for equipment financing or leasing, and it can fund your loan in as fast as 24 hours. It also accepts fair credit, has no down payment requirement and offers discounts for early repayment. But its loan amounts are relatively small compared to some competitors, and its annual revenue requirements are a bit high at $250,000 a year.
Loan amount
Up to $150,000
APR
Not stated
Min. Credit Score
600
National Funding provides up to $150,000 for equipment financing or leasing, and it can fund your loan in as fast as 24 hours. It also accepts fair credit, has no down payment requirement and offers discounts for early repayment. But its loan amounts are relatively small compared to some competitors, and its annual revenue requirements are a bit high at $250,000 a year.
Pros
Funding within 24 hours
No down payment required
Discounts for early repayment
Cons
Smaller loan amounts
Relatively high revenue requirements
Doesn't disclose its interest rates
Loan amount
Up to $150,000
APR
Not stated
Min. Credit Score
600
Requirements
6 months in business, fair to good credit, equipment quote from vendor.
Bluevine offers business lines of credit, with rates starting as low as 7.8% for qualified borrowers. Plus, unlike many other lines of credit, it doesn't charge for opening, closing, maintaining or prepaying your account — and you could be approved in as fast as five minutes. It also offers a free business checking account with your credit line that provides instant access to your funds. But it may require weekly repayments, and it isn't available in every state.
Loan amount
Up to $250,000
APR
As low as 7.8%
Min. Credit Score
625
Bluevine offers business lines of credit, with rates starting as low as 7.8% for qualified borrowers. Plus, unlike many other lines of credit, it doesn't charge for opening, closing, maintaining or prepaying your account — and you could be approved in as fast as five minutes. It also offers a free business checking account with your credit line that provides instant access to your funds. But it may require weekly repayments, and it isn't available in every state.
Pros
Credit lines up to $250,000
Rates as low as 7.8%
No fees for opening, closing, maintaining or prepaying
Cons
Requires weekly repayments
Only accepts corporations or LLCs
Not available in all states
Loan amount
Up to $250,000
APR
As low as 7.8%
Min. Credit Score
625
Loan term
Up to 12 months
Requirements
1 year in business, corporation or LLC, 625 FICO score, $480,000 in annual revenue, no bankruptcies
If you're looking for fast, short-term financing, Credibly offers merchant cash advances (MCAs) up to $600,000, with same-day funding possible for approved borrowers. Its factor rates start at 1.11, which is on the low end of the range, although it's still one of the more expensive forms of business financing. Plus, you may be required to make daily repayments, and you'll need at least $15,000 in monthly revenue.
Loan amount
$5,000 to $600,000
Starting Factor Rate
1.11
Min. Credit Score
500
If you're looking for fast, short-term financing, Credibly offers merchant cash advances (MCAs) up to $600,000, with same-day funding possible for approved borrowers. Its factor rates start at 1.11, which is on the low end of the range, although it's still one of the more expensive forms of business financing. Plus, you may be required to make daily repayments, and you'll need at least $15,000 in monthly revenue.
Pros
Financing up to $600,000
Low factor rates
Same-day funding possible
Lower credit scores accepted
Cons
May require daily repayments
Requires $15,000 a month in revenue
More expensive than other financing options
Loan amount
$5,000 to $600,000
Starting Factor Rate
1.11
Min. Credit Score
500
Loan Term
3 to 24 months
Requirements
500+ credit score, 6+ months in business, $15,000+ average monthly bank deposits
Finder’s business loan experts analyzed dozens of alternative lenders offering multiple loan types. We ultimately chose lenders with competitive rates, fast funding, flexible loan terms and a variety of loan types.
Some of the criteria we used to evaluate lenders include:
Interest rates
Additional fees
Loan amounts
Loan terms
Repayment plans
Turnaround times
Credit score requirements
Time in business requirements
Revenue requirements
Reputation of the lender
How to compare alternative business loans
Consider these factors when choosing an alternative business loan lender.
Rates. You’ll find a wide range of interest rates between lenders — or fees, depending on the loan type — so be sure to explore the best deals on business loans.
Additional fees. Some alternative lenders charge fees on top of fees, which adds to the loan’s cost. To save money, you may want to seek out loans with minimal fees.
Turnaround times. By and large, alternative loans have relatively quick funding —some as soon as the same day — but other options may take a little longer. No doc loans tend to offer the quickest turnaround since they further simplify the application process.
Loan terms. In general, alternative loans have shorter terms than bank loans, but some offer terms of up to 10 years.
Repayment schedules. Some loan types in this space may require weekly or even daily repayments. Carefully consider whether your budget can handle a fairly rigorous repayment schedule.
Lender requirements. Alternative business loan lenders typically have more lenient requirements to qualify. But it’s still a good idea to research the minimum credit score, revenue and time in business requirements to make sure you fit the criteria.
What is an alternative business loan and how does it work?
Alternative loans are basically any type of business lending not offered by traditional brick-and-mortar banks or credit unions. They usually operate online and typically don’t have any physical locations. Other characteristics of alternative loans include less stringent requirements to qualify, faster funding and — sometimes — higher interest rates than banks.
Alternative loan types include term loans, lines of credit and other loans that most regular banks offer. But, the term also encompasses less traditional loans like invoice factoring, merchant cash advances and crowdfunding. And, like with traditional lenders, alternative loans may be secured or unsecured.
When you apply for an alternative loan, you’ll typically complete the application online and submit any required documentation electronically. You may even give the lender access to your bank accounts, which can practically eliminate the need for paperwork.
Alternative loan lenders tend to rely on sophisticated underwriting algorithms to determine loan approval, which also speeds up the process. Once you’re approved and funded, you’ll pay it back, plus interest and fees, like a traditional loan. However, you may have to agree to automatic repayments, which may be weekly or even daily, depending on the loan type.
Pros and cons of alternative business loans
Consider the benefits and drawbacks of alternative business loans.
Pros
Fast and easy application process
More lenient eligibility requirements
Funding as soon as the same day
Cons
May be more expensive
Shorter terms, generally
May require daily or weekly repayments
Not all loan options build business credit
Compare other alternative business loans
Consider these lenders that also offer alternative business loans at competitive rates and for a range of credit types.
Retail businesses or others that have a lot of credit card sales
How to qualify for an alternative business loan
Alternative lenders typically look at your credit score, monthly or annual revenue and how long you’ve been in business.
Revenue. Most lenders want to see at least $10,000 in monthly revenue, but some may require more or less than that.
Credit score. Alternative lenders typically have more lenient credit requirements than banks, but most require at least 600 or more. However, some lenders will accept lower scores, and certain loans require no credit check at all.
Time in business. In most cases, you’ll need to be in business for at least six months to qualify for alternative loans, but some lenders may be more flexible if you meet other criteria.
Business checking account. You need an active business checking account to qualify for alternative business loans. Lenders typically require it to verify your banking activity, deposit your loan proceeds or take out automatic repayments.
How to apply for an alternative business loan
Doing your research and coming to the table prepared will help ensure your success in achieving loan approval.
Determine your need. Define your purpose for the loan and how much you’ll need to achieve that goal.
Check your credit. Knowing your credit score can help guide you toward lenders that work with borrowers in your credit range.
Compare lenders. Consider interest rates, fees and loan terms from multiple lenders to find the best deal. You should also research the lender’s requirements to make sure you meet its qualifications.
Gather your documents. Alternative lenders may not require as much documentation as traditional banks, but you should still be prepared to submit tax returns, bank statements or other financial documents.
Apply. Once you’ve found the right lender, you’ll most likely apply online and submit the required documents. With alternative loans, you could receive a decision in just a few minutes and funding within a day or two.
Frequently asked questions
What’s the minimum credit score to qualify for alternative business loans?
The minimum credit score to qualify depends on the loan type. For lending options like term loans and business lines of credit, you may need a credit score of at least 600 or more to qualify. Other alternative loans, such as MCAs, invoice financing or invoice factoring, may not care about your score if you meet other requirements.
Why avoid alternative lenders?
If you want to get the best rate — and your business meets the required qualifications — going to a bank for a loan may make more sense. You may also want to avoid alternative lenders if you prefer a more personalized experience because they operate pretty much entirely online.
Can I get an alternative business loan if I’m self-employed?
Many alternative lenders consider income from self-employment when determining loan approval. But you’ll still need to prove your income and may have to submit a few years of tax returns to qualify and meet other criteria. If you have trouble qualifying for a business loan, it might be easier to get a personal loan to fund your business instead.
Lacey Stark is a freelance personal finance writer for Finder, specializing
in banking, loans, investing, estate planning, and more. She has 20
years of experience writing and editing for magazines, newspapers, and
online publications. A word nerd from childhood, Lacey officially got her
start reporting on live sporting events and moved on to cover topics
such as construction, technology, and travel before finding her niche in
personal finance. Originally from New England, she received her
bachelor’s degree from the University of Denver and completed a
postgraduate journalism program at Metropolitan State University also
in Denver. She currently lives in Chicagoland with her dog Chunk and
likes to read and play golf. See full bio
BHG Money is a nonbank lender that offers investment, debt consolidation, startup and healthcare-related loans to licensed professionals. Borrow up to $250K with minimal requirements.
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