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Best Alternative Lenders for Small Business

As the CEO of Sunwise Capital, I have dedicated my career to helping small businesses thrive by providing them with innovative financial solutions that meet their unique needs. With an extensive background in the financial industry and a firm commitment to supporting the growth of small enterprises, I have gained a deep understanding of the challenges that small businesses face when seeking financing.

“Best Alternative Lenders for Small Business” is a guide created from this wealth of knowledge, aimed at introducing business owners to the top alternative financing options available in the market.

This guide is designed to navigate the often complex and daunting landscape of non-traditional lending, highlighting lenders who offer flexible, accessible, and tailored financial solutions that can help businesses overcome financial hurdles and capitalize on growth opportunities. By shedding light on the advantages and considerations of each alternative lender, this resource serves as an essential tool for entrepreneurs looking to make informed decisions about securing the right funding for their business’s future success.

Understanding Alternative Lenders for small business

Alternative lending refers to the process of obtaining business loans from non-bank lenders. These lenders offer a variety of loan products that cater to the unique needs of small businesses, including start-ups and those with less-than-perfect credit. Over the years, alternative lending has gained traction due to the limitations faced by small businesses when seeking funding from traditional banks. The rise of alternative lending can largely be attributed to advancements in technology and the accessibility it brings.

The Rise of Alternative Lending

The financial crisis in 2008 had a profound impact on the lending landscape, leading to stricter regulations on traditional banks and making it more challenging for small businesses to secure loans. As a result, alternative lenders filled the gap, offering faster and more flexible financing options. This shift in the lending industry paved the way for the rise of alternative lending, providing small businesses with the opportunity to access capital when they need it most.

One of the key advantages of alternative lending is the speed at which loans can be obtained. Traditional banks often have lengthy application processes and require extensive documentation, which can be time-consuming for small business owners who need funds quickly. In contrast, alternative lenders leverage technology to streamline the lending process, allowing borrowers to complete applications online and receive funding in a matter of days, or even hours. This efficiency has made alternative lending an attractive option for entrepreneurs who value speed and convenience.

How Alternative Lending Works

Unlike traditional banks that rely heavily on credit scores and collateral, alternative lenders use a variety of data points to evaluate a borrower’s creditworthiness. This includes factors such as business revenue, cash flow, and even online customer reviews. By taking a more holistic approach to lending, alternative lenders are able to provide funding to small businesses that may not meet the strict criteria set by traditional banks.

Moreover, alternative lenders often offer more flexible repayment terms compared to traditional banks. While banks typically require fixed monthly payments, alternative lenders may offer options such as revenue-based repayment or flexible repayment schedules tailored to the cash flow of the business. This flexibility can be particularly beneficial for seasonal businesses or those experiencing fluctuations in revenue.

Furthermore, alternative lenders are known for their willingness to work with businesses that have less-than-perfect credit. They understand that a low credit score does not necessarily reflect the true potential of a business and take into account other factors that can demonstrate financial stability and growth potential. This inclusive approach has opened doors for many small businesses that would have otherwise been denied funding by traditional banks.

Types of Alternative Lenders

There are several types of alternative lenders that cater to the diverse needs of small businesses. Understanding the different options available can help you choose the right lender for your specific requirements.

Alternative Lenders for Small Business

When exploring alternative lending options, it’s essential to consider the unique features and benefits that each type of lender offers. By delving deeper into the world of alternative lending, you can make an informed decision that aligns with your business goals and financial needs.

Peer-to-Peer Lenders

Peer-to-peer (P2P) lending platforms connect individual investors with borrowers. These platforms typically operate online and allow borrowers to request loans and investors to choose which loans they want to fund. P2P lending offers a streamlined and efficient process, often providing faster access to funds compared to traditional lenders.

One of the key advantages of peer-to-peer lending is the ability to access funding from a pool of individual investors who are willing to support small businesses. This can be particularly beneficial for entrepreneurs who may not meet the strict requirements of traditional financial institutions.

Online Direct Lenders

Online direct lenders are non-bank lending institutions that operate solely online. They often specialize in providing quick and convenient access to funds, with a straightforward application process. Online direct lenders may offer a range of loan options, including short-term loans, lines of credit, and equipment financing.

Working with online direct lenders can offer small businesses flexibility and speed in securing financing. These lenders often leverage technology to streamline the application and approval process, allowing businesses to access the funds they need in a timely manner.

Invoice Factoring Companies

Invoice factoring is a financing option where a company sells its accounts receivable to a third-party lender at a discount. Invoice factoring companies advance a percentage of the invoice value upfront and collect the full payment from the customer. This can be a beneficial option for businesses that have outstanding invoices and need immediate cash flow.

By partnering with invoice factoring companies, businesses can improve their cash flow management by converting outstanding invoices into working capital. This can help businesses maintain operations, meet financial obligations, and seize growth opportunities without waiting for customer payments.

Choosing the Right Alternative Lender

When selecting an alternative lender, it’s important to consider a few key factors that align with your business needs.

Expanding your business or navigating through a financial rough patch often requires external funding. This is where alternative lenders come into play, offering flexible solutions beyond traditional banks. Understanding the nuances of alternative lending can empower you to make informed decisions that benefit your business in the long run.

Best Alternative Lenders for Small Business

Alternative lenders offer small businesses the financing solutions they need with less red tape and more flexibility than traditional banks. Here are some of the best alternative lenders, including Sunwise Capital, highlighting their offerings along with their pros and cons:

1. Sunwise Capital

Offerings: This company specializes in small business loans, merchant cash advances, and lines of credit, focusing on providing fast and accessible funding options.

  • Pros: Quick approval and funding process; minimal paperwork; loans are available for businesses with less-than-perfect credit. Approve in minutes and funding in hours.
  • Cons: More expensive than traditional bank loans, and the daily, weekly, and monthly repayment schedules may not suit all businesses.

2. Kabbage (An American Express Company)

Offerings: Provides lines of credit for small businesses, using an automated process to quickly evaluate and offer financing.

  • Pros: Immediate access to funds; flexible credit lines; no requirement for perfect credit.
  • Cons: Potentially high APRs; shorter-term repayment periods compared to some alternatives.

3. OnDeck

Offerings: Offers short-term loans and lines of credit with an emphasis on speed and customer service.

  • Pros: Fast funding, often within 24 hours; transparent loan terms; loyalty benefits for returning customers.
  • Cons: Requires a minimum credit score; higher interest rates for some products.

4. BlueVine

Offerings: Provides invoice factoring, lines of credit, and checking accounts tailored to small businesses.

  • Pros: Quick approval process; offers both secured and unsecured financing options; competitive rates for invoice factoring.
  • Cons: Credit line and factoring limits may not accommodate larger financing needs; not all industries are eligible.

5. Funding Circle

Offerings: A peer-to-peer lending platform offering term loans with competitive rates and longer repayment terms.

  • Pros: Lower interest rates compared to many alternative lenders; longer loan terms available; no prepayment penalties.
  • Cons: Requires a strong credit score and financial history; longer application process due to thorough evaluation.

6. Lendio

Offerings: A business loan marketplace that connects small businesses with various lenders, offering a range of products including SBA loans, lines of credit, and commercial mortgages.

  • Pros: Wide range of loan products and lenders; one application reaches multiple lenders; personalized loan matches.
  • Cons: Not a direct lender, so final terms and approval depend on third-party providers; some products may have high APRs.

7. Credibility Capital

Offerings: Provides medium-term loans focusing on businesses with strong credit profiles, offering transparent rates and terms.

  • Pros: Competitive interest rates for creditworthy borrowers; no prepayment fees; transparent fee structure.
  • Cons: Not suitable for businesses with poor credit; maximum loan amount might be lower than some alternatives.

Each of these alternative lenders offers unique advantages to small businesses, from Sunwise Capital’s tailored financial products to Credibility Capital’s competitive rates for strong credit profiles. However, it’s crucial for business owners to weigh the pros and cons of each option, considering factors like loan costs, repayment schedules, and eligibility criteria, to find the best fit for their financial needs and business goals.

Assessing Your Business Needs

Before starting the search for an alternative lender, assess your business needs and determine the amount of funding and repayment structure that will work best. Different lenders specialize in various loan types, so understanding your needs will help narrow down your options.

Consider not only the immediate financial requirements of your business but also its long-term growth trajectory. A lender that aligns with your vision and goals can serve as a strategic partner, offering more than just capital but also valuable insights and support.

Comparing Interest Rates and Terms

Interest rates and terms can vary significantly between lenders. Take the time to compare rates, repayment schedules, and any additional fees associated with the loan. It’s important to consider the overall cost of borrowing to ensure it aligns with your financial goals.

Furthermore, delve into the fine print of the loan agreement to understand any potential hidden costs or clauses that may impact your repayment process. Being diligent in your research can save you from unexpected financial burdens down the line.

Evaluating Lender Reputation and Customer Service

Research the lender’s reputation and customer service record. Look for reviews and testimonials from other borrowers to get a sense of their experience. A reputable lender should be transparent, communicative, and responsive to your needs throughout the loan process.

Building a strong relationship with your lender can pave the way for future collaborations and financial assistance. Consider the lender not just as a one-time transaction partner but as a long-term ally in your business journey.

Benefits of Alternative Lending for Small Business

Alternative lending offers several advantages that make it an appealing option for small businesses.

Small businesses are the backbone of the economy, driving innovation and creating jobs. However, they often face challenges when it comes to accessing financing. Alternative lending has emerged as a lifeline for these businesses, offering a range of benefits that cater to their specific needs and circumstances.

Speed and Efficiency

One of the primary advantages of alternative lending is the speed at which funds can be obtained. Traditional banks often have lengthy application processes, whereas alternative lenders can provide financing within days or even hours. This quick turnaround time allows businesses to seize opportunities and address immediate financial needs.

Moreover, the efficiency of alternative lending extends beyond just the speed of funding. These lenders have streamlined their processes to reduce paperwork and bureaucracy, making it easier for small business owners to navigate the lending landscape without getting bogged down in red tape.

Flexibility and Customization

Alternative lenders typically offer more flexibility in loan terms and repayment options compared to traditional banks. This allows borrowers to tailor the loan to their unique circumstances and cash flow requirements. For businesses seeking customized financing solutions, alternative lending can be a game-changer.

In addition to flexible repayment schedules, alternative lenders often provide personalized guidance and support to help small businesses succeed. They understand the challenges entrepreneurs face and are willing to work collaboratively to find solutions that fit their needs.

Accessibility for Diverse Businesses

Alternative lending has opened doors for businesses that may have been excluded by traditional banks due to factors such as limited credit history or an unconventional business model. Small businesses in various industries can often find alternative lenders willing to work with them, providing access to much-needed capital.

Furthermore, alternative lenders are more willing to look beyond credit scores and collateral when evaluating loan applications. They take a holistic approach, considering factors such as business performance, industry trends, and future potential. This inclusive approach has made alternative lending a beacon of hope for diverse businesses looking to thrive in a competitive marketplace.

Potential Drawbacks of Alternative Lending

While there are many benefits to alternative lending, it’s important to be aware of the potential drawbacks. Understanding these drawbacks can help you make informed decisions when seeking financial assistance for your business.

One significant drawback of alternative lending is the possibility of facing higher interest rates. Alternative lenders often bear higher risk when lending to small businesses, leading to higher interest rates compared to traditional banks. It’s crucial to carefully consider the cost of borrowing and ensure that the interest rates align with your business’s financial capabilities. By analyzing the total cost of the loan, including interest rates and fees, you can make a well-informed decision that supports your business’s financial health in the long run.

Shorter Repayment Terms

In order to mitigate risk, alternative lenders may require shorter repayment terms compared to traditional banks. While this allows for a quicker payoff of the loan, it can also result in higher monthly payments, which may impact your business’s cash flow. Understanding the implications of shorter repayment terms is essential for managing your business’s financial obligations effectively. By creating a detailed repayment plan and forecasting your cash flow, you can navigate the challenges posed by shorter repayment terms and ensure timely payments to the lender.

The Risk of Predatory Lending

With the rapid growth of alternative lending, there has been an increase in predatory lending practices. It’s essential to thoroughly research potential lenders and avoid those that engage in unfair practices or have hidden fees and penalties. Protecting your business from predatory lending should be a top priority. By conducting due diligence, reading reviews, and seeking recommendations from other business owners, you can safeguard your business from falling victim to predatory lending schemes.

Preparing to Apply for Alternative Lending

Before applying for alternative lending, it’s important to ensure that you have everything in order. Taking the time to thoroughly prepare can increase your chances of securing the financing you need for your business.

One crucial step in preparing for alternative lending is to assess your current financial situation. This involves not only understanding your credit score but also evaluating your cash flow, debt-to-income ratio, and overall financial health. Alternative lenders may consider a variety of factors beyond just credit scores, so having a comprehensive view of your financial standing can help you present a strong case for why you are a good candidate for a loan.

Understanding Your Credit Score

Review your personal and business credit scores to have a clear understanding of where you stand. While alternative lenders may be more lenient regarding credit scores, having a good credit history can still positively impact your loan terms and rates. In addition to checking your credit scores, it’s essential to review your credit report for any errors or discrepancies that may need to be addressed before applying for a loan.

Gathering Necessary Documentation

Prepare the required documentation, including financial statements, bank statements, and tax returns. Having these documents readily available will streamline the application process and expedite the lender’s evaluation of your loan application. In addition to the standard financial documents, consider including any relevant business contracts, agreements, or projections that can provide further insight into your business’s financial stability and growth potential.

Creating a Solid Business Plan

A well-prepared business plan will demonstrate to lenders that you have a clear vision and strategy for your business’s success. Outline your goals, market analysis, and financial projections to give lenders confidence in your ability to repay the loan. Beyond just presenting a plan on paper, be prepared to discuss and defend your business strategy during the application process, showcasing your knowledge and passion for your industry.

Navigating the Application Process

Applying for alternative lending involves a series of steps that vary depending on the lender. It’s crucial to understand the process and requirements to increase your chances of approval and expedite the funding for your business.

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Before diving into the application, take some time to research and compare different alternative lenders. Each lender may have specific criteria, interest rates, and terms, so finding the right fit for your business is essential. Look for reviews and testimonials from other borrowers to gauge the lender’s reputation and customer service.

Online Application Process

Most alternative lenders have online applications that can be filled out from the comfort of your own office. Provide accurate and complete information to expedite the evaluation process. Be prepared to provide additional documentation if requested. It’s important to double-check all the information you provide to avoid delays in the approval process. Make sure to have key documents such as bank statements, tax returns, and business financials ready to speed up the application.

Understanding Approval Times

The approval time for alternative lending can vary depending on the lender and the complexity of your application. Some lenders can provide instant decisions, while others may take a few days to review your application. Be patient and communicate with the lender throughout the process. If there are any delays, don’t hesitate to follow up with the lender to ensure that your application is being processed efficiently. Clear communication can help address any issues promptly.

Receiving Your Funds

Once you’ve been approved, the lender will provide instructions on how to receive your funds. This can be through direct deposit, a wire transfer, or even a prepaid card. Different lenders have different disbursement methods, so ensure you understand how the funds will be transferred to your business. Take note of any fees associated with the disbursement method and plan accordingly to make the most of your funding. It’s also a good idea to establish a relationship with the lender for any future financial needs your business may have.

Conclusion: Is Alternative Lending Right for Your Business?

Alternative lending has revolutionized the way small businesses access financing, providing options for those who may have been turned away by traditional banks. The speed, flexibility, and accessibility of alternative lending make it an attractive choice for many entrepreneurs. However, it’s essential to carefully consider the potential drawbacks, such as higher interest rates and shorter repayment terms. By thoroughly understanding your business needs, evaluating lenders, and preparing your application, you can make an informed decision on whether alternative lending is the right choice for your small business.

If you’re ready to take the next step in securing the financing your small business needs, look no further than Sunwise Capital. With a decade of experience in providing tailored business loans, we understand the importance of speed and efficiency. Our range of financing options, including unsecured business loans and merchant cash advances, are designed to meet your unique needs without the requirement of cash or assets for security. Experience quick approval and same-day funding to help establish a solid financial foundation for your business. Unlock Your Potential with Sunwise Capital and propel your business forward.

Mark 7

Mark J. Kane, Founder & CEO of Sunwise Capital, is a distinguished entrepreneur with over 16 years in business financing. Beginning as a psychologist, he quickly became a trailblazing Hospital Administrator. Mark has built multiple ventures, notably accelerating a startup to $18M within months. His transition to Sunwise Capital stems from a deep-seated desire to empower business owners with strategic financial solutions. Recognized for his expertise, Mark's leadership at Sunwise Capital reflects his commitment to fostering business growth and success. Click the link to read more about the author.

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