Every new business needs funding. But banks and high-interest loans aren’t always the best options. Thankfully, there are ways to get alternative business funding. These funding options allow you to purchase new equipment or finance other business expenses without going through traditional financial institutions.
Why Should You Go with Alternative Business Funding?
We all know what the traditional options are. Whatever the reason, you might want to try a different solution. Here are some common motives for alternative business funding:
- Traditional lenders may not approve you for a loan
- Alternative financing offers more flexibility
- You don’t want your credit checked
- The application process for alternative funding is simpler
- You may not be comfortable with a high-interest loan
- You need funding quickly and traditional financing takes too long
Whatever the reason, there are plenty of alternative business funding options available.
12 Alternative Business Financing and Leasing Options You Can Use
There are countless ways you could finance or lease your business equipment needs. We’ve put together this extensive list of alternative business funding and leasing options you can try.
1. Clicklease
Clicklease offers simple equipment leasing. Equipment is usually the biggest upfront expense for small businesses and startups. Equipment-specific leasing saves cash for other non-financeable expenses and doesn’t affect your ability to qualify for other types of financing. It can be a great tool for maintaining cash flow.
Clicklease is available for small business owners regardless of their credit score or time-in-business. So they’re great as a low credit score leasing option. Applying only takes a few a minutes, you’ll get an instant decision, and you can use your approval at any equipment seller you choose.
2. Online Loans
Online lending works a lot like traditional lending, except the loan doesn’t come from banks, credit unions, or other conventional sources. Generally speaking, online loans have less strict requirements for things like credit score or business revenue.
On top of that, the application process is usually easier. Plus, you can receive funding quicker. The downside is that online loans typically come with higher interest rates than you’d get from banks.
3. Term Loans
With a term loan, you borrow a specific amount of money and promise to repay it within a scheduled term (such as six months or two years). The interest rate can either be fixed or variable.
Term loans are usually reserved for small businesses with sound financial history. Typically, you’d get one from a bank or credit union, but you could get a term loan from an online lender or a loan marketplace.
4. Personal Loans
Personal loans are a viable option for alternative business funding. They’re great if you haven’t been in business for long or aren’t generating much revenue yet. The caveat is your household income and personal creditworthiness determine the loan amount and payment plan. Plus, there is some inherent risk to your personal credit should the business fail.
5. SBA Loans
These are small loans backed by the Small Business Administration. SBA loans are partially subsidized by the government, eliminating some of the risks of traditional lending sources.
The SBA doesn’t provide the loan directly. Rather, the loans come from other financial institutions. If you default on payments, the SBA promises to repay a portion of your loan. SBA loans have lower interest rates since the lender knows they’ll get some money back.
6. Lines of Credit
A line of credit (LOC) is a form of alternative business funding that can come from traditional institutions or online lenders. Lines of credit work a lot like credit cards: Instead of borrowing money up front, you’re guaranteed a sum of money you can draw from any time. That way, you can borrow a fractional amount and only pay interest on the borrowed credit.
7. Crowdfunding
Crowdfunding is a type of alternative business funding where large groups of people donate small amounts of money to a project or cause. It’s been made popular by sites like Kickstarter, GoFundMe, and Patreon.
Keep in mind that your project has to appeal to a wider audience. In exchange for funding, you’ll want to offer them products or perks as incentives. Crowdfunding can help get your business off the ground but isn’t sustainable for the long term.
8. Merchant Cash Advances
If your business accepts sales through credit cards, a merchant cash advance (MCA) might be an option for you. Instead of going to a lender, a merchant fronts the cash and is repaid through future revenue from credit card transactions.
Merchant Cash Advances are a possible funding option if you can’t qualify for other forms of lending. Generally, there’s no deadline to repay an MCA. The merchant will take a cut of your sales until they’ve been paid back in full. The downside is that the amount you repay will fluctuate depending on how well your business performs.
9. Business Credit Cards
Credit cards can help fund your projects without requiring a loan. You can use them to make purchases while building up your business credit profile. Choose a credit card that offers rewards that help your business, such as travel miles or cash back. As with other credit cards, they may come with fees or high interest rates. While credit cards are the go-to option for many small businesses, unless you pay your balance in full every month, it can be difficult to know how much you’ll actually end up paying.
10. Invoice Factoring
You may want to consider this option if you have cash flow problems from unpaid invoices. Invoice factoring involves selling off your invoices to a third party (known as a “factor” or “factoring company”).
After you sell the invoice, the factor will front you up to 95% of the invoice amount while they collect the payment on your behalf. Once they receive payment, the factoring company pays you the remaining invoice amount minus a fee (up to 5%).
11. Business Grants
Grants are free money. Small business grants are usually provided by the government and offer entrepreneurs the alternative business funding they need for their business. Even if your business is already well-established, grants can provide additional funding to grow and expand your operation.
Unlike a typical business loan, grants don’t have to be repaid. But for obvious reasons, business grants are very popular and can be incredibly difficult to obtain. If you go for this option, keep in mind the application and approval process could take a long time.
12. Venture Capitalists and Angel Investors
Venture capitalists and angel investors can offer alternative business funding to startups and small businesses in exchange for partial ownership. The main difference is that a venture capitalist is an organization, while an angel investor is an individual.
These options can provide more than just financial benefits. Both angel investors and venture capitalists can offer their expertise, help you network, and give you a clear direction for your business.
Get the Funding You Need Today
Now that you’ve considered all the alternative business funding and leasing options, it’s time to take action. With Clicklease, you can avoid the hassle of financing through a bank. Learn how quick and painless it is to get the equipment you need with Clicklease and get approved in minutes!
