6 Great Alternative Funding Options for Small Businesses

Written by Karen Bryan

If your business is in need of cash to get it through a lull or needs money to expand, the first thing you’ll probably think to do is head over to the bank and apply for a loan. However, that is not the only option available to you today. Here are six great alternative funding options for small businesses.

Online Lending

A growing number of websites allow you to apply for a loan online. They may be located in your city or on the other side of the world. Online lending sites may let you apply for a loan at a lower interest rate than is available in your country, a major attraction if you’re afraid interest rates will skyrocket after Brexit. You can find loans for Ltd companies at very reasonable rates online, and you should shop around online before applying for a business loan at a brick and mortar institution.


Crowdfunding can be used as a way to raise capital for a business loan, and thus be seen as a form of online lending. Or you can use crowdfunding to test the interest in a new product, asking people to invest in the project in return for the first items off the assembly line and maybe some swag from the company. The crowdfunding page for the new product or service idea can also be used to market your business and product line overall. If no one invests in the project, then you know there isn’t really demand for it. Remember that crowdfunding sites will take a percentage of the project funding, and your success depends on your ability to promote the project.

Merchant Cash Advances​

Merchant cash advances provide capital up front in return for a fixed percentage of each day’s credit card transactions plus interest. They are similar to personal payday loans,but rely on cash flow on a daily basis to repay the loan. The benefit of this approach is that it provides capital up front regardless of your credit score. The issues small businesses face include the fact it limits your cash flow day by day until it is repaid and that it isn’t available to you unless you see a significant credit card sales volume.


Business grants offered by a number of governments may be a low cost way to raise capital. The challenges include qualifying for one in the first place, and meeting their terms and conditions. If you don’t meet their definition of diversity or don’t provide a product or service in an industry or area the grants are intended to stimulate, you’re out of luck.

Angel Investors

Angel investors are people who invest in startup companies or early-stage companies. They typically take a fifth to a quarter of the company in return for the investment. The advantages of this include avoiding debt payments that crimp your cash flow and retaining control over the company. Angel investors may provide business or industry expertise and link you up with major customers you otherwise couldn’t reach. Disadvantages of this approach include the difficulty of raising capital through selling shares later, the demands of angel investors to raise capital later when they need to be repaid, and the challenge of finding one.

Factoring / Invoicing

One advantage of factoring/invoicing is that its value depends on the creditworthiness of the customers who owe you money, not your own financing. The main limit of factoring or invoicing is the fact you must have invoices to sell for a percentage of their amount due in order to use this method to raise money. It isn’t really an option if you haven’t been collecting on your debts and they are now potentially worthless.


Online lending is an excellent option for finding a loan at a reasonable interest rate and the terms you want. Crowdfunding may let you raise capital without paying interest,but it all depends on your ability to market the project. Merchant cash advances and invoice/factoring let you raise capital regardless of your credit score and repay it from cash flow from customers. Grants are a low cost option if you qualify. Angel investors offer reasonable rates and valuable expertise, but at the cost of control over your business and the ability to raise capital in other ways.