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Alternative Funding for Small Businesses: Ways to Bypass Traditional Bank Loans

Small businesses are the backbone of the American economy. They create two out of every three new jobs in the country and account for nearly half of all private-sector employment. But even though they're so important, small businesses often have a hard time getting access to capital. That's because traditional banks are reluctant to lend money to small businesses that don't have a lot of collateral or a long history of profitability.

Fortunately, there are plenty of alternative small business funding options that don't involve going to a bank. In this article, we'll explore some of the most popular alternative funding sources and how they can benefit your business.

Merchant Cash Advances

graphic cash advance

If you need a quick infusion of cash, a merchant cash advance (MCA) can be a great option. With an MCA, you sell a portion of your future credit card sales at a discount to an MCA provider. In exchange, they give you a lump sum of cash that you can use for any business purpose.

One of the biggest advantages of an MCA is that it's easy to qualify for. That's because MCA providers base their approvals on your credit card sales, not your credit score. So if you have a steady stream of credit card sales, you're likely to be approved for an MCA, even if you have bad credit.

While getting merchant cash advances, make sure to:

  • Research different MCA providers to find the best rates and terms: Not all MCA providers are created equal. Some will offer you a higher advance amount than others, and some will have lower rates and fees. So, it's important to shop around to find the best deal.
  • Read the fine print: Make sure you understand all the terms and conditions of your merchant cash advance before you sign any contracts. Pay close attention to the repayment schedule and fees, so you know exactly what you're getting into.

Unsecured Business Lines of Credit

If you need a flexible source of small business financing, an unsecured business line of credit could be a good option. With this type of financing, you're approved for a certain amount of credit that you can draw on as needed.

Unlike a loan, you only pay interest on the amount of credit you actually use, making lines of credit a flexible and affordable financing options for small businesses. And because lines of credit are unsecured, they don't require any collateral, making them easier to qualify for than some other types of financing.

To get unsecured business lines of credit, don't forget to:

  • Check your personal credit score: Because lines of credit are unsecured, your personal credit score will be a major factor in whether you're approved. So make sure to check your credit report and score before you apply.
  • Shop around: There are a lot of different lenders out there that offer lines of credit. So take your time to compare offers and find the one that's right for you.

Unsecured & Secured Business Loans

file folder tab loans

If you need a larger amount of financing, a business loan might be the way to go. A small business loan can be either unsecured or secured, depending on the lender and your qualifications. Unsecured business loans don't require any collateral, while secured loans do.

Secured loans tend to have lower interest rates than unsecured loans, but they're also more difficult to qualify for. That's because lenders see them as a higher risk, since they can seize your collateral if you default on the loan.

If you're considering a business loan, be sure to:

  • Consider both unsecured and secured options: Unsecured business loans might be more difficult to qualify for, but they don't require collateral.
  • Compare interest rates and terms: Make sure you understand the interest rate and repayment terms before you sign on the dotted line.
  • Understand your qualifications: Each lender has different qualifications, so make sure you understand what they are before you apply.

Equipment Leasing & Financing

If you're a small business owner in need of equipment but don't have the cash on hand to buy it outright, leasing or financing may be a good option for you. There are a number of companies that specialize in equipment financing, and they can help you get the equipment you need with minimal up-front costs.

Leasing is a good option if you need equipment for a short-term project or if you're not sure you can commit to owning the equipment long-term. It's also a good way to get newer, higher-end equipment that you might not be able to afford to buy outright.

Financing is a good option if you're looking to own the equipment long-term or if you have the cash on hand to make a down payment. It can also be a good option if you're looking to finance multiple pieces of equipment at once.

There are a few things to keep in mind when considering equipment leasing or financing. First, make sure you understand the terms of the lease or loan and what, if any, early termination fees there may be. Second, be sure to shop around and compare rates and terms from a few different companies before choosing one. And finally, make sure you read the fine print carefully to understand all the costs associated with the lease or loan.

SBA Loans

sba loan agreement being completed

The Small Business Administration (SBA) loan is a government-backed loan program that provides small businesses with access to capital. The SBA does not lend money directly to small businesses, but it does provide guarantees to banks, credit unions, and other lenders, making it easier for them to approve loans for small businesses.

One of the most popular SBA loan programs is the 7(a)-loan program, which helps businesses get access to working capital to start or expand their business. The 7(a)-loan program offers loans of up to $5 million with interest rates as low as 4%.

If you're a small business owner with bad credit, an SBA loan can be a great option to get the business financing you need. While traditional banks may be hesitant to approve alternative small business loans with bad credit, the SBA's guarantee makes it easier for lenders to take a chance on approving a loan.

To qualify for an SBA loan, your business must meet the SBA's size standards. These standards vary by industry, but generally, businesses must have less than $15 million in annual revenue to qualify.

In addition to meeting size standards, your business must also be for-profit, operate in the United States, and have a good credit history. If you can meet these requirements, an SBA loan could be a great option for financing your small business.

Commercial & Investment Real Estate Loans

little gray house sitting on clipboard

Another option for many small business owners looking for alternative financing is a commercial or investment real estate loan. These alternative business lending options are typically used to purchase or refinance property, such as an office building, retail space, or apartment complex.

Commercial and investment real estate loans can be a great option for small business owners because they often have low interest rates and long repayment terms. For example, you may be able to get a 30-year loan with an interest rate of 5%.

To qualify for a commercial or investment real estate loan, you'll typically need to have good credit and a strong business plan. Lenders will also want to see that you have experience in the real estate industry.

If you're thinking about using a commercial or investment real estate loan to finance your small business, be sure to compare rates and terms from multiple lenders to get the best deal.

Fix & Flip Loans

one man handing another man stack of cash

A fix and flip loan is a type of short-term loan used to finance the purchase and renovation of a property, typically with the intent to sell it for a profit.

Fix and flip loans are typically interest-only loans, meaning that the borrower only pays the interest on the loan during the loan term and does not repay any of the principal. At the end of the loan term, the borrower must sell the property in order to repay the loan in full.

There are several benefits to using a fix and flip loan to finance the purchase and renovation of a property, including:

  • Quick financing: Fix and flip loans can be approved and funded quickly, which is ideal for investors who need to move fast on a property.
  • No need for perfect credit: Because fix and flip loans are typically short-term and interest-only loans, borrowers with less-than-perfect credit can qualify.
  • Low down payment: Fix and flip loans typically have a lower down payment requirement than traditional business loans, making them a good option for investors who don’t have a lot of cash on hand.

There are some risks to be aware of when taking out a fix and flip loan, including:

  • The property may not sell: If the property doesn’t sell within the timeframe specified in the loan agreement, the borrower will be responsible for repaying the loan in full, which could put them in a difficult financial position.
  • The property may not sell for enough to cover the loan: Even if the property sells, it may not sell for enough to cover the entire loan amount, leaving the borrower responsible for repaying the difference.

Before taking out a fix and flip loan, it’s important to weigh the risks and benefits carefully to make sure that it’s the right decision for you.

Cannabis, Hemp ad CBD Business Loans

cbd oil seed and green leaf

The cannabis industry is one of the fastest-growing industries in the United States, and it’s showing no signs of slowing down. According to a report by Arcview Market Research, the legal cannabis industry is expected to grow from $6.6 billion in 2016 to $134.4 billion by 2030.

Despite this rapid growth, the cannabis industry faces some unique challenges when it comes to accessing capital. Because cannabis is still illegal at the federal level, most banks and financial institutions are wary of providing loans to businesses in the industry. This leaves many cannabis entrepreneurs with few options for financing their businesses.

Fortunately, there are a few alternative lenders that are willing to work with cannabis businesses. Some of the options available include:

  • Cannabis Business Loans: Cannabis business loans are designed specifically for businesses in the cannabis industry. These loans can be used for a variety of purposes, including equipment purchases, working capital, and real estate financing.
  • Hemp Business Loans: Hemp business loans are similar to cannabis business loans, but they’re specifically for businesses that deal with hemp-based products. These products include CBD oil, hemp-based cosmetics, and food products.
  • CBD Business Loans: CBD business loans are designed for businesses that deal with cannabidiol (CBD) products. These products can include oils, tinctures, edibles, and topicals.

Which One Should I Choose?

man hodinig sign small business loans

The type of loan you choose will depend on your business’s needs and your eligibility. For example, if you have bad credit, you may have a harder time qualifying for traditional loans. In this case, an alternative lender that specializes in loans for businesses with bad credit may be a better option.

Here's the list of factors you should consider when choosing a loan:

  • How much money you need: You should first determine how much money you need to borrow. This will help you narrow down your options and choose a loan that’s right for your needs.
  • The purpose of the loan: You should also have a clear idea of what you’ll be using the loan for. This will help you choose a loan with the right terms and conditions.
  • Your credit history: If you have bad credit, you may have a harder time qualifying for traditional loans. In this case, an alternative lender that specializes in loans for businesses with bad credit may be a better option such as South Florida Funding Group.
  • The repayment terms: You should also consider the repayment terms of the loan, including the repayment schedule and the interest rate. You’ll want to choose a loan with terms that you’re comfortable with and that fits your budget.

No matter which type of loan you choose, be sure to do your research and compare multiple options before making a decision. This will help you find the best loan for your needs and avoid getting into financial trouble.

The Bottom Line

For small business owners who may have trouble qualifying for a traditional bank loan, there are a number of alternative funding options available. These options include fix and flip loans, cannabis business loans, hemp business loans, and CBD business loans. Each type of loan has its own advantages and disadvantages, so it’s important to choose the right one for your needs.

Need Help with Getting Alternative Funding for Your Small Business?

If you're looking for an alternative lender that specializes in loans for businesses with bad credit, South Florida Funding Group is a great option. We offer a variety of loans, including CBD business loans, hemp business loans, and cannabis business loans. We also have a wide range of repayment terms and interest rates to choose from, so you can find a loan that fits your budget. Contact us today to learn more about our loans and how we can help you get the funding you need.

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The business funding you need when others say No!.

2569 Bay Pointe Dr.
Weston FL 33327

Email:
drew@southfloridafundinggroup.com 

786-544-2700

DISCLAIMER

 The operator of this website is NOT a lender, does not make offers for loans, and does not broker online loans to lenders or lender partners. Customers who arrive at www.SouthFloridaFundingGroup.com are matched with a lender or a lender partner, who offer business loan products or credit repair services.