The Best Sources of Alternative Financing for Your Business

Ways to Fund Your Business Without a Bank Loan

Female small business owner taking inventory with digital tablet

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In light of the ongoing public health and economic crisis, many small businesses continue to face financial challenges. 

According to recent data from the U.S. Census Bureau, as of March 2021, just over a quarter of small businesses reported the pandemic as having an overall large negative effect on their business, while nearly 45% of businesses cited the effect as moderately negative. 

For small business owners who continue to face unprecedented hardships, and may not presently qualify for bank loans, there are some potentially pivotal sources for alternative financing to help them keep their doors open.

Learn what these sources are below, as well as how to obtain them, their relevant benefits, and associated risks.

Business Credit Cards

Business credit cards are credit cards issued under the business’s name, and used solely for business purposes. Approval for a business credit card often depends on the business owner’s personal credit and financial situation. Having a business credit card can help build business credit, offer rewards and bonuses, be useful in keeping personal and business expenses separate, and provide a relatively quick way to access cash. 

High interest rates and fees, however, can make it easy for extra charges to add up quickly, so be sure to keep an eye on your balance, and make all of your payments on time. Depending on the terms of your business credit card, misusing a payment could affect your personal credit as well.  


Try to negotiate the lowest possible interest rate with your credit card company. A credit card payoff calculator can help you determine how long it will take to pay off your balance with different interest rates and payment plans. 


Crowdfunding is a financing method of raising funds through the support of backers who typically contribute through an online platform. There are three types you should be aware of: 

  • Reward crowdfunding: This type of crowdfunding offers backers of your campaign rewards such as exclusive experiences, or an early version of your product or service.
  • Debt crowdfunding: This method allows lenders to loan a portion of the funds and earn interest upon the debt repayment. 
  • Equity crowdfunding: This method gives supporters investment opportunities in exchange for equity or potential future return. 

Kickstarter and Indiegogo, for example, are platforms dedicated to crowdfunding. When choosing where to launch your crowdfunding efforts, research your options—there are various fees involved, and some sites have an all-or-nothing approach where you don’t receive your funds unless you meet your target goal. 


Crowdfunding can help build awareness and publicity for your business, but it also comes with the pressure to deliver in a short time, and may require a sizable amount of marketing in order to run an effective campaign.

Invoice Financing

Invoice financing is the process of selling your unpaid invoices to a lender in return for a percentage of the payment due in advance. The structure and fees can vary depending on the lender—fees are often a fixed payment or percentage based. Typically, once the customer pays the invoice in full, you then pay the lender according to your agreement, and receive the remainder of any funds you’re owed. 

Invoice financing can provide quick access to cash instead of waiting until invoices are paid, but it can be accompanied by relatively high rates and fees. This method is usually more effective for larger, established enterprises that get paid via invoices from a regular client base.

Merchant Cash Advances 

A merchant cash advance is a lump sum of funding that is then paid back (plus fees) on a regular basis based on a percentage of the business’s daily credit card sales. Because payback is percentage based, during times when your business is slower in sales, you would make smaller payments versus busier times when your repayments would be larger.

This type of debt financing can be relatively easy and quick to come by. However, the steep rates and fees associated with it can make it one of the more expensive options (and one that’s even considered a last resort choice for financing).

SBA Loans 

The U.S Small Business Administration (SBA) offers a variety of loan programs to assist small businesses. However, the agency doesn’t usually act as a lender itself, but instead works with lenders to provide the loans. The SBA offers loan guarantees, and establishes guidelines for the loans. Loan programs have specific eligibility requirements, but they typically depend on what the business does to make money, its ownership character, and business location. The most common SBA loan program is its 7(a) Loan Program for general small business loans. 

The SBA reduces risk and makes capital more accessible to lenders, which, in turn, makes the loan process easier for small businesses. Common benefits of an SBA loan are larger loan amounts, lower interest rates, longer repayment times, and more flexibility. Downsides, though, include the lengthy approval process, which can take weeks to months.  


Use the SBA’s Lender Match tool to connect with potential lenders for your small business.

PPP Loans

The federal government established the Paycheck Protection Program (PPP) in 2020 to help small business owners during the pandemic. The PPP, which is administered by the SBA, is designed to incentivize businesses to keep employees on the payroll. If borrowers follow certain criteria, they may be eligible to have their loan forgiven. Some businesses that have already received a PPP loan may qualify for a Second Draw PPP loan.


On March 30, 2021, President Biden signed a bill into law that extends the PPP application deadline to May 31, 2021. In addition, the bill extends PPP authorization through June 30, 2021 in order to provide additional time for the SBA to process applications received by the application deadline.

Venture Capital

Depending on your business idea and goals, seeking venture capital (VC) funding could get your enterprise up and running. VC investments are commonly an exchange of cash in return for shares, and typically come from individual investors or organizations.

Investors are seeking the largest returns so they tend to be attracted to businesses that have high growth potential. When involving venture capitalists, you will no longer be the sole decision maker for the business. It’s common for venture capitalists to become involved in the business —they might, for example, look to obtain board positions, or take on managerial roles.

The Bottom Line

When deciding what alternative financing option best fits your business needs, consider how much money you’re looking for, the purpose of the funding, how soon you need the cash, and your timeframe for repayment. Lenders, in turn, might want to know details about the financial standing of both you as an individual, as well as your business.

Shop around to find the best rates and terms, and make sure you understand all of the conditions of an arrangement before committing. Especially during a time when financial viability is of the utmost importance, you should carefully consider the pros and cons of your options, and double check your numbers to ensure you're making a smart decision for your small business.

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The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.
  1. United States Census Bureau. “Small Business Pulse Survey." Survey Response Detail, 03/15/21 to 03/21/21. Accessed April 5, 2021.

  2. Score. “Simple Steps to Choosing the Right Financing." Page 3. Accessed April 5, 2021.

  3. American Express. "3 Financing Options for When Your Business Needs Funding." Accessed April 5, 2021.

  4. U.S. Small Business Administration. “Paycheck Protection Program." Accessed April 5, 2021.

  5. Score. “Are You Ready for Venture Capital?” Accessed April 5, 2021.

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