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6 Alternative Business Funding Options for the Small Business Owner

According to Sean O’Malley, president and co-founder of SmartBiz, “Although small businesses make up a vital part of the economy, access to small-business loans has been restricted since 2008.”

Even though small business lending options are improving, there are still many entrepreneurs that are still ineligible for traditional lending options. For one reason or another, these businesses are considered to be too risky and are turned away. Banks refuse to offer business financing of any kind. Thankfully, the number of alternative options for small businesses and startups continues to increase.

If you’re business is currently in need of a little extra working capital to fund growth or to get your business startup off the ground, consider the following alternative business loan options:


There are many crowdfunding platforms available to the entrepreneur. Crowdfunding allows startups and small business to raise the cash they need to launch products, fund projects and/or grow by soliciting contributions via online communities. Some of the most popular crowdfunding sites include: Kickstarter, GoFundMe, Indiegogo, RocketHub and Crowdfunder, among others. How does it work? The entrepreneur provides lenders with rewards, rather than repayment. These perks might include the business’ product or merchandise.


Different from crowdfunding, investors are repaid (unless a loan defaults) when an entrepreneur chooses to use crowdlending. Crowdlending sites are sough-after for peer-to-peer loans. Depending on the site, the entrepreneur must recruit a designated number of people before they can create a public page. This ensures that cash is raised for the loan, while also providing incentive for the entrepreneur to repay the debt. Popular crowdlending sites include Funding Circle and Lending Club.

Angel Investors

Angel investors have helped to startup many prominent companies, such as Google and Costco. An angel investor invests in a the early days of a business venture in exchange for a return on their investment (20 to 25 percent, for example). One of the advantages of angel investors for the startup company is the strategic experience that investor will likely have. Not only will you secure much needed funds, you can also benefit from their mentorship.


The factoring process allows a business to use its unpaid accounts receivable to generate cash. The factoring company advances your company money on invoices you have already sent out. Once you’ve been paid, the amount is paid back to the factoring company – minus any fees agreed upon.  The advantage of factoring is that it allows your business to boost its cash flow and gain some flexibility as you wait for customers to pay their invoices.

Merchant Cash Advance

A merchant cash advance is not a business loan. It is actually a sale. The alternative lender purchases the business’ future credit card sales at a discount. The entrepreneur and the lender agree upon the amount of sales being purchased and a what discounted cost. The advantage of securing a cash advance is that alternative lenders specialize in working with business types and industries deemed “high risk” by banks. Thus, opening up the doors to business owners struggling with bad credit, limited time in business, bankruptcy and other “higher risk” situations. The application process is known for being fast, simple and hassle-free. For example, with alternative lender First American Merchant, businesses can secure funding in as little as 24 hours – if not sooner.