Cash flow is the lifeblood of any business. Without incoming cash, the venture will wither and die. Small businesses in particular may find themselves prone to cash-flow problems. This is especially so in these recent few months: Many firms are finding themselves in a financial pickle during the challenging business climate caused by the COVID-19 pandemic.

A business loan is generally one of the solutions that come to mind when businesses experience cash-flow problems. Typically, a small business will contact a local bank to apply for a loan.

The granting of a business loan by a banking institution is by no means automatic. Banks will deny loan applications for a variety of reasons; most especially if the credit rating of the applicant is poor or even average. Additionally, some banks are reticent to lend to a start-up business, especially after the regulations put in place after the 2008 financial meltdown.

What Is Alternative Lending?

If a small business is refused a loan by a bank, alternative lenders may be a good place to turn for fast online business loans. Alternative lending collectively refers to those firms that exist outside of the traditional lending domain of the commercial banks. One of the particularly appealing aspects of alternative lenders is that they often have lower approval requirements than traditional banks. Most alternative lenders are online firms without brick-and-mortar branches.

Types of Alternative Lenders

As start-up and entrepreneurial businesses have expanded, so has the alternative lending industry. Here are but a few of the non-banking sources when looking to secure an alternative loan:

  • Peer-to-Peer Lenders
  • Bridge and Hard-Money Loans
  • SBA Loans
  • Asset-Based Lines of Credit
  • Purchase-Order Financing
  • Merchant Cash Advances
  • Unsecured Business Lines of Credit

Risks and Benefits for Small Businesses

The benefits of utilizing alternative lending sources are fairly clear. In addition to being able to supply a cash infusion to those with less-than-stellar credit ratings, alternative lenders often make loan decisions more quickly than commercial banks. Moreover, alternative lending is more flexible and can be tailored more than traditional bank loans.

While alternative lending rose to meet needs that traditional lenders could not fulfill, it has grown into an industry that serves emerging businesses, established corporations, and everything in between.