The 5 Most Popular Types of Alternative Lending
Not all your business funding needs to come from traditional bank loans and profits, there are many viable and useful alternative lending types to choose from when you need a bit of extra capital. Many of these funding types can be used for everything from paying the monthly bills to purchasing large orders of supplies or inventory.
Alternative Marketplace Funding
There are more marketplaces for funding than just bank lenders such as mid prime lenders, non-bank private lenders and fintech business lenders. These marketplaces have sprung up to fill the gap between those who need capital and those who qualify for traditional bank loans.
As an alternative to traditional loans to buy new or used equipment, you can finance it through leasing the items that you need. Many equipment leasing companies can offer you a range of makes and models to fit your needs and some can even bundle service plans and other extras. Some of the benefits of leasing equipment is that the terms can be flexible enough that you will not have to store items during their off season or you can upgrade equipment at the end of the term.
One form of alternative lending is invoice funding in the forms of invoice factoring and accounts receivable financing. Both methods act like a cash advance on the invoices where your customer has up to ninety days to pay for the work you have done. With factoring, the factor takes possession of the invoices and with AR financing, you retain ownership.
ACH Merchant Funding
Automated Clearing House merchant funding is a form of merchant cash advance where the advance is paid back through a percentage of your daily sales using your bank account. It is becoming more popular because many companies can get the cash the same day that they apply for it.
MCA Merchant Split
This is another type of merchant cash advance which is similar to ACH merchant funding in that you are repaying the advance through your daily sales but differs because it is repaid through splitting your credit card receipts with the lender instead of through funds taken out of your bank account.
Alternative lending can be an excellent way for your company to get the capital you need and to manage your cash flow. These methods have popped up as a way to fill the gap between businesses who need cash and those who can qualify for a traditional bank loan, but they can be used by almost any company.