8 business loan alternatives worth considering


Funding is just about the most important thing that a business needs for growth.

While some entrepreneurs initially financed their business using their own money or loans from friends and family, there eventually comes a moment in their professional lives when they have to lean on financial institutions for consistent growth.

Big companies often don’t have any trouble qualifying for bank loans, but the same can’t be said for smaller businesses.  That’s why there’s something known as alternative lending or financing.  Alternative lenders provide business loans in Canada that are not only flexible but are also fast to fund, as well as accessible.

Here are some of the best alternative business loans available to small businesses or businesses in general:

1.   Lines of Credit

A line of credit (LOC) is a sort of alternative business lending that people can get either from an online lender or a bank.  However, LOCs are usually much easier to obtain online than from a financial institution like a bank.

LOCs typically serve as a business’s source of working capital or a financial net.  As a result, users will receive a sum of money that they can draw any time (similar to a credit card).  What’s more, they’ll be charged interest on the amount that they borrow.

Online LOCs are an excellent alternative for businesses that don’t require any specific amounts of money but instead just want access to some spare funding to be able to handle expenses like payroll during hard times.

2.   Small Business Alternative Loan

Conventional financial institutions are known for rejecting small business or micro business loan applications.  Fortunately, alternative lenders come with looser regulations and are thus able to capitalize on the greater demand for small businesses.

According to the 2016 Federal Reserve Bank of Richmond’s survey, only 58% of small business loan requests were approved by traditional banks, as compared to 71% that were approved by alternative lenders the very same year.

Alternative lenders can take advantage of a wide set of machine learning and data – enabling them to tap more into the small business lending market than traditional banks.

3.   Term Loans

When it comes down to commercial financing, many people would usually think of a business term loan.  These loans come with a specified number of payments, repayment time, as well as a variable or fixed interest rate.

Besides being issued by alternative lenders, the difference between conventional bank loans and term loans is that they usually come with higher interest rates and shorter terms.  Nevertheless, it is relatively easier to qualify for online term loans.

With that in mind, the most common type of term loans and alternative lending are those of short-term – loans that have a repayment period of up to a year.  On the other hand, other lenders, including Funding Circle, provide longer options.

4.   Online Loans

Online loans are provided by online lenders, who in turn offer similar products as those of banks, including lines of credit and term loans.  However, online loans are different from bank loans in a few ways that are actually crucial.

Online loans typically come with less strict requirements regarding annual revenue, time in business, and credit score.  They can be funded quickly, and are very easy to apply for.  However, there is a catch; in exchange for all this accessibility and convenience, online loans typically come with higher fees and interest rates than those of bank loans.

5.   Peer-To-Peer Loan

This is another popular alternative commercial lending option available.  It offers the availability of a partner bank, an investor, a borrower, via an online platform.  Taking advantage of metrics such as social media activity and credit scores, P2P platforms can help link borrowers to lenders at desirable interest rates.

P2P platforms encourage interactions without necessarily owning loans – ensuring that the costs are kept low.  This is especially a great option for those who wish to refinance their ongoing debt at the lowest interest rate.

6.   Merchant Cash Advances

Merchant cash advances (MCA) allow business owners to get a lump sum finance, in exchange for a fraction of the future sales from their credit cards.  Those who maintain a consistent streak of credit card payments are able to qualify for this option.

By receiving an MCA, a percentage of the sales from your credit card will be taken by the provider until the balance has been remitted.  And if the sales get higher, then you’ll be paying more.  On the other hand, you will be paying much less when the sales are slow.  This can help your business fulfill short-term financial obligations without harming your cash flow.

7.   Equipment Loans

Equipment financing, also known as equipment loans, is the kind of business loan that is mainly used for buying business equipment.  Lenders usually allow borrowers to finance 100% of an equipment’s value – with the equipment serving as collateral on the loan.

Like invoice financing, users can easily qualify for equipment financing – lenders evaluate an equipment’s value to determine one’s eligibility, which is more than conventional requirements.

Like some of the other best alternative business loans, we’ve covered our list so far, some credit unions and banks offer equipment financing.  However, online lenders can offer more flexible options and faster processes (though the interest rates are high).

8.   Installment Loans

These loans are offered to borrowers in a lump sum, which is later repaid to lenders at regular intervals until the interest along with the principal is paid off.  Most installment loans granted by alternate lenders come with a fixed payment amount, indicating that interest rates don’t fluctuate during the loan’s life.  Installment loans are used commonly to finance the purchase of vehicles, real estate, and business equipment