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 offer loans to riskier businesses, they tend to have higher interest rates and shorter repayment terms.
Best Alternative Lending Options
Alternative business lending provides funding from sources other than a traditional bank. Here’s how it works and where to get the financing you need.
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OnDeck: Best for short-term loan
$5,000 to $250,000
32.40% Minimum APR offered to at least 5% of customers (not the lowest rate offered)
Up to 24 months
Pros
- Same-day funding available
- Offers loyalty discounts
- Builds business credit history
Cons
- Not available in North Dakota
- Doesn’t fund all industries
- High interest rates
Why we picked it
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 ever need to borrow from the lender again. OnDeck also offers a business line of credit up to $200,000 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.
Read our OnDeck review.
How to qualify
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
Bluevine: Best for lines of credit
$1,000 to $250,000
Starting at 7.80% simple interest for a 26-week repayment term
6 or 12 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 U.S. territories, North Dakota or South Dakota
Why we picked it
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 You can withdraw up to your credit limit as often as needed, paying interest only on the withdrawn amounts.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 business day to receive funds.
Note that Bluevine is better suited for businesses with high revenue and that receiving same-day funding may incur a fee.
Read our Bluevine review.
How to qualify
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
Taycor Financial: Best for equipment financing
$500 to $2,000,000
4.99%
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
Taycor Financial offers up to 100% equipment financing with flexible repayment options, including monthly, quarterly or semi-annually. You can borrow up to $2,000,000 to cover essential equipment expenses including computers, printers, vehicles and restaurant appliances. 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
To qualify for equipment financing, you’ll need to meet Taycor Financial’s criteria of:
- Minimum credit score: 600
- Minimum time in business: No minimum required
- Minimum annual revenue: No minimum required
Fora Financial: Best for bad credit
$5,000 to $1,500,000
1.13 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
Fora Financial is one of our top choices for a bad credit business loan since you need a FICO Score of only 570 to qualify. With funding available for up to $1,500,000, you can tackle a range of business expenses including marketing, equipment, inventory and expansions.
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 as little as six months. One downside is that the factor rate can make it difficult to compare against other offers.
Read our Fora Financial review.
How to qualify
To qualify for a small business 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
Fundbox: Best for startups
Up to $250,000
4.66% for 3-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
- Only one product available
- Short repayment terms
Why we picked it
If you’re looking for quick startup financing, Fundbox accepts early-stage companies after only six months of operation. You can access up to $250,000 whenever you need funds, paying interest only 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 offers only one product at the moment, so it may not be a fit for those looking for one-stop-shop business banking.
Read our Fundbox review.
How to qualify
To qualify, you’ll need to meet Fundbox’s criteria of:
- Minimum credit score: 600
- Minimum time in business: 3 months
- Minimum annual revenue: $100,000
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
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
To qualify, 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
Reliant Funding: Best for merchant cash advances
$2,000 to $2,000,000
1.20 factor rate
2 to 24 months
Pros
- Flexible eligibility requirements
- 24-hour funding available
- Origination fees waived for those with military affiliation
Cons
- MCAs can be more expensive than traditional business loans
- May require daily or weekly payments
- Website content can be misleading
Why we picked it
With an 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
To qualify, you’ll need to meet Reliant Funding’s criteria of:
- Minimum credit score: 500
- Minimum time in business: 3 months
- Minimum annual revenue: $60,000
Prosper: Best for personal loans
$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
Businesses that can’t qualify for a business loan may find it easier to obtain a personal loan for their funding needs. As a peer-to-peer (P2P) 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.
P2P lenders typically have more lenient eligibility requirements, making them a great choice for early-stage startups or those with limited credit profiles. Just make sure your budget can handle the higher interest rates and added fees.
Read our Prosper review.
How to qualify
To qualify, you’ll need to meet Prosper’s criteria of:
- Minimum credit score: 600
- Minimum time in business: Not required
- Minimum annual revenue: Personal income required, but amount not disclosed
Pros and cons of alternative business lending
| Pros | Cons |
|---|---|
| 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 may need to make daily or weekly payments instead of having a more traditional monthly repayment schedule. |
Frequently asked questions
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 websites, even while their actual 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 operation, 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.