Best Alternative Business Lending Options

Alternative financing can provide the funds your business needs with flexible eligibility requirements, although rates and terms may be less competitive.

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Written by
Jill A. Chafin
Updated July 17, 2024
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Alternative lenders at a glance

OnDeck: Best for short-term loan

$5,000 to $250,000

27.30%*

Up to 24 months

*This rate reflects the estimated starting APR offered to at least 5% of OnDeck customers. It doesn’t reflect the minimum APR offered by the company.
Pros
  • Same-day funding available
  • Prepayment and loyalty discounts
  • Builds business credit history
Cons
  • Not available in North Dakota
  • Doesn’t fund all industries
  • High interest rates

Why we picked it

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OnDeck is our top pick for a short-term loan because you can borrow relatively large amounts without needing an excellent credit score or lengthy business history. Plus, you get a discount if you repay the loan early. OnDeck also offers a business line of credit up to $100,000 if you need ongoing access to funds.

Note that OnDeck doesn’t fund all types of industries, such as art dealers, nonprofits and gambling businesses. Furthermore, rates can run high — with an average 56.1% for its term loan.

Read our OnDeck review.

How to qualify

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In order to qualify, you’ll need to meet OnDeck’s criteria of:

  • Minimum credit score: 625
  • Minimum time in business: 12 months
  • Minimum annual revenue: $100,000
See Your Business Loan Offers

Bluevine: Best for lines of credit

$6,000 to $250,000

7.80%

$6,000 or $250,000 months

Pros
  • Flexible funds that can be used for various business purchases
  • Quick funding options
  • Accepts fair credit scores
Cons
  • Same-day funding could incur a fee
  • High annual revenue requirement
  • Not available in Nevada, North Dakota or South Dakota

Why we picked it

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If your business needs occasional access to revolving funds, a Bluevine business line of credit could help. You can withdraw up to your credit limit as often as needed, only paying interest on the withdrawn amounts. Applications can be approved in as little as five minutes, with immediate access to funds if you have a Bluevine checking account. Otherwise, it typically takes one to three business days to receive funds.

Note that Bluevine is better suited for well-established businesses.

Read our Bluevine review.

How to qualify

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In order to qualify, you’ll need to meet Bluevine’s criteria of:

  • Minimum credit score: 625
  • Minimum time in business: 12 months
  • Minimum annual revenue: $120,000
See Your Business Loan Offers

Taycor Financial: Best for equipment financing

$500 to $5,000,000

7.90%

12 to 84 months

Pros
  • Offers 100% financing with no down payment
  • Ideal for startups and low credit borrowers
  • No prepayment penalties
Cons
  • Daily or weekly payments may be required for some products
  • Must pay a documentation fee
  • Stricter criteria for equipment refinancing

Why we picked it

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Taycor Financial offers up to 100% equipment financing with flexible repayment options, including monthly, quarterly or semi-annually. You can borrow up to $5,000,000 to cover essential equipment expenses like computers, printers, vehicles, restaurant appliances and more. Since the equipment acts as collateral to secure the debt, Taycor Financial could be a great option for startups or low-revenue companies.

In addition to equipment financing, Taycor Financial offers term loans, lines of credit, accounts receivable factoring, SBA loans and more.

Read our Taycor Financial review.

How to qualify

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In order to qualify for equipment financing, you’ll need to meet Taycor Financial’s criteria of:

  • Minimum credit score: 550
  • Minimum time in business: No minimum required
  • Minimum annual revenue: No minimum required
See Your Business Loan Offers

Headway Capital: Best for unsecured loans

Up to $50,000

Not disclosed

12 to 24 months

Pros
  • No collateral required
  • Quick approvals
  • No monthly or annual service fees
Cons
  • Unsecured loans typically have higher interest rates
  • May require weekly payments
  • Not available in Arkansas, Connecticut, Montana, Michigan, North Dakota, Nevada, Rhode Island, South Dakota or Vermont

Why we picked it

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An unsecured business loan from Headway Capital can provide up to $50,000 with no collateral required. As a flexible line of credit, you can withdraw funds as needed to cover payroll services, inventory, seasonal fluctuations in income and more. If you’re able to provide collateral, you can apply for a credit limit up to $100,000.

Headway Capital uses a big-picture approach to evaluate your company’s financial health, looking beyond your credit score. Because of this, Headway Capital could be a good choice for low-credit businesses or startups that have been operating for at least one year.

Read our Headway Capital review.

How to qualify

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In order to qualify for an unsecured loan, you’ll need to meet Headway Capital’s criteria of:

  • Minimum credit score: Not disclosed
  • Minimum time in business: 12 months
  • Minimum annual revenue: $50,000
See Your Business Loan Offers

Fora Financial: Best for bad credit

$5,000 to $1,500,000

1.15 factor rate

4 to 18 months

Pros
  • Low minimum credit score requirement
  • Discount for paying off your loan early
  • Quick funding
Cons
  • Doesn’t help build business credit
  • High revenue needed to qualify
  • Factor rate makes it difficult to compare loan costs

Why we picked it

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Fora Financial is one of our top choices for a bad credit business loan since you only need a FICO Score of 570 to qualify. With funding available up to $1,500,000, you can tackle a range of business expenses like marketing, equipment, inventory, expansions and more.

While many lenders require businesses to operate for a minimum of 12 months, Fora Financial works with early-stage startups that have been in business for only six months or longer. However, the factor rate can make it difficult to compare against other offers.

Read our Fora Financial review.

How to qualify

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In order to qualify for an unsecured loan, you’ll need to meet Fora Financial’s criteria of:

  • Minimum credit score: 570
  • Minimum time in business: 6 months
  • Minimum annual revenue: $240,000
See Your Business Loan Offers

Fundbox: Best for startups

Up to $150,000

4.66% for 3-month terms
8.99% for 12-month terms

3 to 12 months

Pros
  • Ideal for early-stage businesses
  • Next-day financing available
  • Available in all U.S. states and many territories
Cons
  • Low credit limit compared to other lenders
  • Doesn’t fund all industries
  • Short repayment terms

Why we picked it

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If you’re looking for quick startup financing, Fundbox accepts early-stage companies after only three months of operation. You can access up to $150,000 whenever you need funds, only paying interest on withdrawn amounts. If approved, funds could hit your bank account as soon as the next business day.

Upgrading to Fundbox Plus unlocks additional benefits, such as up to 20% off fees and member perks. However, Fundbox doesn’t lend to all industries, such as adult entertainment, online gaming and nonprofit organizations.

Read our Fundbox review.

How to qualify

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In order to qualify for an unsecured loan, you’ll need to meet Fundbox’s criteria of:

  • Minimum credit score: 600
  • Minimum time in business: 3 months
  • Minimum annual revenue: $30,000
See Your Business Loan Offers

National Funding: Best for fast funding

$5,000 to $500,000

1.11 factor rate

4 to 60 months

Pros
  • Funding in as soon as 24 hours
  • Discount for repaying loan early
  • No down payment or collateral required
Cons
  • High annual revenue needed to qualify
  • Factor rate makes it hard to compare against other lenders
  • Relatively low loan amounts for equipment financing

Why we picked it

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If you’re faced with a financial emergency, National Funding offers quick business financing to help you get the cash your business needs within approximately 24 hours. You can get a term loan of up to $500,000, or equipment financing and leasing up to $150,000 — with no collateral required.

National Funding also offers a Guaranteed Lowest Payment program for equipment leases, which applies if you find a better rate with matching terms and conditions and without contingencies.

Read our National Funding review.

How to qualify

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In order to qualify for an unsecured loan, you’ll need to meet National Funding’s criteria of:

  • Minimum credit score: 600
  • Minimum time in business: 6 months
  • Minimum annual revenue: $250,000
See Your Business Loan Offers

Reliant Funding: Best for merchant cash advances

$5,000 to $2,000,000

1.20 factor rate

3 to 15 months

Pros
  • Flexible eligibility requirements
  • 24-hour funding available
  • Origination fees waived for those with military affiliation
Cons
  • Merchant cash advances can be more expensive than traditional business loans
  • May require daily or weekly payments
  • Not available in North Dakota, South Dakota and Vermont

Why we picked it

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With a merchant cash advance (MCA) from Reliant Funding, you could receive up to $2,000,000 in exchange for a portion of your future debit and credit card sales. Similar to other MCA lenders, Reliant Funding has lenient eligibility requirements, making it a feasible option for startups, low-revenue businesses or those with poor credit. That said, MCAs tend to cost more than other types of small business financing and are generally best used after you’ve exhausted other options.

Make sure your business budget can handle the short repayment term, which often requires daily or weekly payments.

Read our Reliant Funding review.

How to qualify

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In order to qualify for an unsecured loan, you’ll need to meet Reliant Funding’s criteria of:

  • Minimum credit score: 500
  • Minimum time in business: 6 months
  • Minimum annual revenue: $60,000
See Your Business Loan Offers

Camino Financial: Best for immigrants

$10,000 to $50,000

32.00%

24 months

Pros
  • Offers financing to non-U.S. business owners
  • Low minimum annual revenue requirement
  • Collateral isn’t required
Cons
  • Smaller loan amounts
  • High starting interest rate
  • Not available in Hawaii, New Jersey, Puerto Rico, Michigan, Nevada or the Caribbean Islands

Why we picked it

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If you want to start a business as an immigrant but are struggling to qualify for traditional financing, Camino Financial could be a perfect fit. In addition to providing small business loans to non-U.S. citizens, Camino Financial offers educational resources and business support to help underserved and minority entrepreneurs succeed in today’s market.

While Camino Financial has flexible eligibility requirements, loans aren’t available to all industries or in all states.

Read our Camino Financial review.

How to qualify

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In order to qualify for an unsecured loan, you’ll need to meet Camino Financial’s criteria of:

  • Minimum credit score: 670
  • Minimum time in business: 12 months
  • Minimum annual revenue: $30,000
See Your Business Loan Offers

Prosper: Best for peer-to-peer lending

$2,000 to $50,000

8.99%

24 to 60 months

Pros
  • Allows you to apply with a co-applicant
  • Quick funding
  • Flexible eligibility requirements
Cons
  • Technically not a business loan
  • Charges an origination fee
  • Interest rates can run high

Why we picked it

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As a peer-to-peer lender, Prosper provides up to $50,000 in personal loans by connecting borrowers with a range of investors. While you can use personal loans for business purposes, it’s important to track your expenses to ensure you’re ready to go when tax season rolls around.

Peer-to-peer lenders typically have more lenient eligibility requirements, making them a great choice for early-stage startups or those with a limited credit profile. Just make sure your budget can handle the higher interest rates and added fees.

Read our Prosper review.

How to qualify

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In order to qualify for an unsecured loan, you’ll need to meet Prosper’s criteria of:

  • Minimum credit score: 560
  • Minimum time in business: Not required
  • Minimum annual revenue: Personal income required but amount not disclosed
See Your Business Loan Offers

What is alternative lending?

Alternative lending refers to small business financing offered by companies outside the traditional banking world. Often referred to as online lending or fintech lending, these lenders typically operate without brick-and-mortar branches.Nonbank lenders might raise their own capital and lend to small businesses directly, or they may help connect borrowers with investors via a marketplace platform.

Since alternative lenders utilize the latest underwriting technology, eligibility requirements tend to be more lenient than with conventional banks.

On this page

Traditional banks vs. alternative lenders

Traditional banks and alternative lenders offer a range of financing options for small business owners. Here’s an overview of the key differences between traditional and alternative lenders.

Traditional lendingAlternative lending
Eligibility requirementsStricter eligibility requirements, such as needing excellent credit (personal and business), high annual revenue and several years of successfully running your business. More lenient requirements, making it more accessible for recently established businesses or those with bad credit.
Loan amountsTypically offers larger loan amounts, with SBA options going up to $5.5 million.Typically offers lower loan amounts, with maximums ranging from $50,000 to $2 million.
Time to fundingCan take anywhere from minutes to multiple weeks or even months to approve and process. Approvals can take minutes, with funds delivered within the same day or up to three business days.
Loan productsTerm loans, business lines of credit, working capital loans, equipment financing, commercial loans and SBA loans.Online lenders offer similar products, plus invoice factoring, peer-to-peer lending and merchant cash advances (MCAs).
SupportUsually have brick-and-mortar branches for in-person support, coaching and networking opportunities. May provide a dedicated loan advisor to help with business goals, but communications will be limited to phone, video and email.
ReputationMay have a more solid track record, as well as extensive protections and insurance in place.Some alternative lenders offer predatory loans or unregulated financial products. Be sure to read reviews to pick a reputable lender before proceeding.

Types of alternative lending for small businesses

Here are some types of small business loans to consider from an alternative lender.

Term loan

Term loans are lump sum financing used for medium to large business expenses, such as purchasing new equipment or remodeling a building. Online lenders typically offer funding from $5,000 to $500,000 or more.

Interest rates vary, but once determined, your monthly payments should remain the same. You can choose between a short-term business loan (three to 24 months) or long-term business loan (five to 25 years), depending on your business’s level of need.

Line of credit

Similar to a credit card, a business line of credit offers access to revolving funds where you can borrow up to your credit limit as often as needed. Funds can be used for any business-related expense, and you only pay interest on what you withdraw — although some lenders charge monthly or annual maintenance fees. Credit limits can range from $1,000 to $250,000 or higher.

Equipment financing

Equipment financing can fund assets like manufacturing equipment, computers, vehicles or other large machinery needed for your business. Since the equipment typically acts as collateral to reduce lender risk, eligibility requirements tend to be more lenient. However, the lender can seize the equipment if you fail to repay the debt. Some lenders offer up to 100% or more in financing, with limits going up to $1 million and beyond.

Merchant cash advance

A merchant cash advance (MCA) is an alternative form of business financing where you receive a cash advance in exchange for a percentage of your business’s future debit and credit card transactions. MCAs can typically provide between 50% to 250% of your monthly sales, depending on the lender and your qualifications. However, MCAs charge factor rates instead of traditional interest rates. Once converted, APRs can run in the triple digits, making MCAs a more costly way to borrow.

Invoice factoring

A business may sell its unpaid invoices to a factoring company in exchange for money up front, typically up to 80% to 95% of the total value of the invoices. In turn, the company collects money from the customer, taking a small fee before passing the remaining funds onto the business owner. Invoice factoring is often confused with invoice financing, which involves taking out a loan against the invoices.

Peer-to-peer lending

With peer-to-peer lending (P2P), borrowers are connected with individual or commercial investors via a marketplace lending platform. P2P financing usually only offers personal loans, which typically have more lenient eligibility requirements and fewer fees than traditional business loans. However, you will likely have fewer options, with loan amounts ranging from $2,000 to $50,000 There may be some state-imposed restrictions as well.

Pros and cons of alternative lending

ProsCons

 Flexible eligibility requirements. Alternative lenders typically have lower credit score, revenue and time-in-business requirements than traditional lenders.

 Quick and easy application process. Since online lenders don’t require an in-person appointment at your local branch, the application process is typically speedy and convenient.

 Fast funding. Some alternative lenders offer same-day financing, while others typically process and fund your loan within one to three business days.

 Higher interest rates. Alternative lenders typically charge high interest rates, especially if you have poor credit or can’t provide collateral.

 Lack of transparency. Some lenders don’t disclose the maximum interest rates and additional fees until you’ve completed the application process.

 Less flexible terms. You might need to make daily or weekly payments instead of a more traditional monthly repayment schedule.

Is alternative lending right for my business?

Alternative business funding became a more viable option after the 2008 financial crisis because many banks stopped offering small business loans. As a result, online lenders stepped forward to fill the gap, providing much-needed assistance to small business owners.

Although traditional financing usually offers more attractive rates, especially with SBA loans, the strict requirements exclude many small and new businesses.

You might want to consider alternative lending solutions if you:

  • Have a reliable source of monthly revenue
  • Have been running your business for at least six months
  • Have a low or bad credit score
  • Need access to immediate funds
  • Were recently denied funding through a traditional bank
  • Are capable of making weekly repayments
  • Need a smaller loan amount

How to get an alternative business loan

Since alternative lenders operate solely online, most applications are relatively straightforward and easy to complete. Here are the general steps to take when you’re ready to apply for an alternative small business loan:

1. Decide how much you need.

Create a budget to review your company’s current cash flow. From there, write up a list of your business’s most urgent and ongoing needs. Consider whether you need cash upfront or on an as-needed basis. Make sure to avoid overborrowing — keeping up with schedule payments is essential for being able to borrow more down the road.

2. Determine your eligibility.

You can review general business loan requirements on each lender’s website. While eligibility criteria will vary by lender and loan type, most lenders will review your personal FICO Score and business credit score, time in business and annual revenue. And if you’re applying for a secured business loan, make sure you meet the collateral requirements.

You can monitor your credit score for free with LendingTree Spring to see where you stand before applying.

3. Research alternative business lenders.

Some alternative lending products aren’t regulated like traditional bank loans, such as business payday loans. Because of this, it’s worth reading small business lender reviews and watching out for signs of predatory lending, such as unclear terms, high interest rates or a long list of fees.

4. Gather required documents.

Although alternative lenders typically don’t require as much extensive paperwork like traditional lenders, you may need to supply some of the following documents:

5. Submit your application.

One of the best parts of working with an alternative lender is that the applications are typically quick, automated and 100% online. If more information is required, your lender will reach out to you.

If you want to find the best offer, go ahead and submit applications to multiple lenders. You generally have a 14- to 45-day window to “rate shop” without any further impact to your credit.

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How to compare alternative business loans

Here are some key factors to consider to help you pick the best alternative business loan that fits your needs and financial goals.

 Interest rate: Business loan interest rates will vary depending on the lender, loan type and your criteria. Some alternative lenders charge factor rates, which can increase the overall cost of borrowing. While variable rates might seem appealing, fixed rates can offer more predictability over the long run.

 Additional fees: Some lenders charge extra fees, such as origination and late fees, as well as prepayment penalties. Read your business loan agreement before signing the dotted line to ensure you understand the total costs involved.

 Repayment term: Alternative loans typically have shorter repayments, which could put a strain on your business budget. Crunch the number in advance to ensure your budget can handle the repayment schedule.

 Time to fund: Online business loans typically have a fast turnaround time, helping you access the funds you need within a few business days. However, if you’re able to wait, traditional funding like SBA loans and bank business loans typically provide the most competitive rates and flexible terms.

 Lender support: Finding an alternative lender that offers free business coaching and resources can help strengthen and improve your business model.

Additional funding options for your business

If you struggle to meet the criteria for traditional financing and want to avoid the higher rates that come with alternative lending, here are some other options to consider.

  • SBA loans: Partially guaranteed by the government, SBA loans can provide up to $5 million in funding for businesses unable to secure traditional financing – $5.5-million for certain energy-related projects. However, it’s recommended to have at least two years of business history plus a credit score of 680 or higher to increase your chances of approval.
  • Small business grants: You can apply for various small business grants through government agencies, corporations and nonprofit organizations. While grants tend to be competitive, it’s worth the effort of applying to get free money for your business.
  • Business credit cards: It’s generally easier to get approved for credit cards than small business loans. You can even get a business travel credit card to maximize your travel rewards. Just note that credit cards typically have high APRs so try to pay off your balance every month if you can.
  • Crowdfunding: You can raise donations from friends, family and the general public for specific projects or new product releases with a crowdfunding platform like GoFundMe or Kickstarter. While it’s free for you to create and launch a campaign, crowdfunding platforms typically deduct a small fee from your donations to pay for their services.
  • Microloans: If you need a small infusion of capital, a microloan can provide between $500 to $50,000 with flexible eligibility requirements. Alternative lenders and the SBA both offer microloan options.

How we chose the best alternative lenders

We reviewed more than 25 lenders to determine the overall best 10 alternative business loans. We evaluated online lenders based on the following criteria:

  • Minimum credit score: We focused on lenders that accept personal credit scores between 525 to 670.
  • Funding speed: Lenders on our list offer streamlined application processes with an average turnaround time of one to three business days.
  • Rates and terms: We prioritize lenders with competitive fixed rates, fewer fees and flexible options for repayment terms.
  • Repayment experience: We consider each lender’s reputation and overall business practices. We favor lenders that report to all major credit bureaus, offer reliable customer service and provide extra perks to customers, like free business coaching and resources.

Frequently asked questions

Alternative lenders are private companies that provide various financial products to businesses of all sizes. They aim to create a quick, online application process with flexible eligibility criteria. In contrast, traditional banks typically have longer wait times with more stringent eligibility requirements and may require you to apply at a physical branch.

Nonbank funds come from the lender’s own capital, other investors or peer-to-peer funding. Since these nontraditional lenders loan to riskier businesses, they tend to have higher interest rates and shorter repayment terms.

Generally, alternative lenders are reputable, reliable and trustworthy, making them a solid choice for small business financing.

However, certain alternative lenders prey on those in desperate need of funds and participate in sketchy tactics, such as advertising loan products they don’t offer. Furthermore, they might list attractive interest rates on their website even though their rates are much higher. And there are scammers out there who will pose as lenders, often offering loans with terms that seem too good to be true.

Do your research to make sure you’re working with a legitimate lender and not a scam, and avoid falling for a subpar online lender by reading online reviews at the Better Business Bureau and Trustpilot. If in doubt, call the company’s customer service department to better understand its integrity and standards. And most importantly, read the fine print before agreeing to the loan’s terms and conditions.