The Best Sources of Alternative Financing for Your Business

There are many ways to fund your business without a bank loan.

Alternative Financing: Many small businesses still face financial difficulties due to the economic and public health crisis.

Recent data from the U.S. Census Bureau shows that just over 25% of small businesses said the pandemic had significantly impacted their business. Nearly 45% reported it as having a moderately negative effect. 

Small business owners in extraordinary financial hardships may not qualify for bank loans. However, there are alternative financing options that could help them keep their doors open.

Below, you will learn about these sources, how to get them, their benefits, and the risks associated with using them.

Business Credit Cards

A business credit card is issued under the business’s name and used only for business purposes. The business owner’s credit score and financial standing often determine whether they are eligible for a business credit line. A business credit card is a great way to build credit for your business, provide rewards and bonuses, keep personal and business expenses separate and allow you to access cash quickly.

However, high-interest rates and fees can lead to additional charges quickly. So make sure you keep your balance in check and pay your bills on time. Misusing a payment can hurt your credit score, depending on how it is structured.


Negotiate the best interest rate possible with your credit card company. You can use a credit card payment calculator to determine when it will take you to pay off your balance.


Crowdfunding enables you to raise funds by securing backers, who usually contribute via an online platform. You should know about these three types:

  • Reward crowdfunding  This type of crowdfunding gives backers of your campaign exclusive experiences or early versions of your product or services.
  • Debt crowdfunding – allows lenders to lend a portion of the funds and earn interest on the debt repayment.
  • Equity crowdfunding – allows supporters to invest in equity or potential future returns.

Indiegogo and Kickstarter, for example, are platforms that specialize in crowdfunding. Research your options when choosing where to start your crowdfunding efforts. Many fees are involved, and some sites offer an all-or-nothing approach, meaning you will only get your funds if your goal.


Crowdfunding is a great way to increase awareness and publicize your business. However, it can also come with the pressure to deliver quickly and may require significant marketing to make an impact.

Invoice Financing

Invoice financing involves selling unpaid invoices and paying a percentage of the advance payment. Fees and structure can vary depending on which lender. Typically, the fee is a percentage or a fixed payment. You will receive the remaining funds owed to you after the customer has paid the invoice in full.

Although invoice financing can give you quick access to cash, waiting for the invoices is only sometimes possible. However, it can come with high fees and rates. A more efficient method for established businesses to receive regular invoices. 

Merchant Cash Advances

A merchant cash loan is a lump-sum amount of funding. It is back (plus any fees) every month, based on a percentage of the business’s credit card sales. Payback is percentage-based, so you will make lower payments during slower sales than when you are busier.

This type of financing is relatively simple and fast. This type of debt financing can be relatively easy and quick to obtain.

SBA Loans

The U.S. Small Business Administration offers several loan programs for small businesses. The agency does not usually act as a lender but rather works with lenders to make the loans. SBA provides loan guarantees and sets guidelines for loans. Although loan programs have strict eligibility requirements, they on the amount of money the business makes, its ownership, and its location. The 7a SBA Loan Program is the most popular for general small business loans.

The SBA helps reduce risk and make capital more available to lenders. An SBA loan has many benefits, including higher loan amounts, lower interest rates, and longer repayment terms. The lengthy approval process can take up to weeks and sometimes even months.


To connect with potential lenders, use the SBA’s, Lender Match Tool.

PPP Loans

To assist small-business owners during the pandemic, the federal government created the Paycheck Protection Program in 2020. The PPP by the SBA encourages businesses to keep their employees on the payroll. A Second Draw PPP loan may be available to qualified borrowers who have previously received a loan from the PPP. 


On March 30, 2021, President Biden signed a bill that extended the deadline for PPP applications to May 31, 2021. The bill also extends PPP authorization until June 30, 2021, to allow the SBA additional time to process the applications received before the deadline.

Venture Capital

Based on your goals and business ideas, venture capital (VC0_) funding may be the best way to get your company started. VC investments typically involve the exchange of cash for shares. Individuals or companies usually make them.

The bottom line

Consider the amount of money you are looking for, the purpose, and the time frame for repayment. Lenders might also want to know about your financial situation as an individual and for your business.

Before you commit, make sure that you fully understand the agreement. You should consider all options carefully, especially when your financial viability is critical. Double-check your numbers to make sure you are making the right decision for your small business.

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