6 Alternative Financing Options for Small Businesses Denied by a Bank
For many small business owners, traditional bank loans are not always an option.
Fortunately, alternative financing options have become increasingly accessible in recent years, offering entrepreneurs different avenues to obtain the capital they need to sustain or grow their businesses.
In this article, we’ll explore some of the most popular alternative financing options for small businesses and how entrepreneurs can access them.
Crowdfunding
Crowdfunding allows small business owners to pitch their idea to the public and receive funding from a large number of individuals. Platforms like Kickstarter and Indiegogo offer entrepreneurs the ability to raise funds through a variety of campaigns. To run a successful crowdfunding campaign, it’s important to have a clear message, an engaging video, and a compelling reason for people to invest in your idea.
2. Revenue-Based Financing
Revenue-based financing is a type of alternative financing that provides capital to businesses in exchange for a percentage of their future revenue. Unlike traditional loans, there is no fixed repayment schedule, and payments are made as a percentage of revenue. This type of financing is often used by businesses that have a steady revenue stream but may not qualify for traditional financing due to factors like a short operating history or insufficient collateral. Learn about AltCap’s revenue-based financing options here.
3. Invoice Financing
Invoice financing allows businesses to receive cash advances on their outstanding invoices. This can be a good option for businesses that have a lot of outstanding invoices but are short on cash. To access invoice financing, businesses can work with companies like BlueVine or Fundbox, which provide quick and easy access to cash.
4. Peer-to-Peer Lending
Peer-to-peer lending connects small business owners with individual investors who are willing to lend money. Platforms like LendingClub and Prosper offer small business loans with competitive interest rates and flexible terms. To qualify for a P2P loan, entrepreneurs will need to have a good credit score and a solid business plan.
5. Community Development Financial Institutions (CDFIs)
CDFIs are mission-driven financial institutions that provide loans to businesses and individuals in underserved communities. These organizations are often focused on promoting economic and community development, and their lending criteria is often more flexible than traditional banks. To access a CDFI loan, entrepreneurs can research organizations in their community or work with a local Small Business Development Center, such as the Missouri Small Business Development Center at UMKC.
6. Microloans
Microloans are small loans that are typically less than $50,000 and are designed to help entrepreneurs start or grow their businesses. These loans are often available through nonprofit organizations, CDFIs, and other lenders. While the interest rates may be higher than traditional bank loans, microloans often have more flexible lending criteria and can be a good option for small business owners who may not qualify for a larger loan.
As you can see, there are several alternative financing options available for small businesses that have been denied a traditional bank loan. By exploring these options and working with the right partners, entrepreneurs can find the funding they need to grow their businesses and achieve their goals.
Don't let a lack of capital hold you back. See how AltCap can help fund your business and bring your vision to life. Reach out to get started.
