The Ultimate Small Business Finance Guide

Chapter 4: Alternative Finance


What is alternative business funding?

Alternative business funding includes non-traditional methods of generating working and investment capital for your business.

Alternative Finance Options

What are some alternatives to bank loans for small businesses?

If you’ve been rejected by the big banks, you’re not alone. It’s critical that you soldier on to raise operating capital, though; a U.S. Bank study found that 82% of business failures are due to issues with cash flow. Where can you turn for help?

Some of the alternatives to bank loans for small businesses include higher interest private lenders, angel investors and venture capitalists, SBA loans (longer term loans guaranteed by the U.S. government), grants, lines of credit, merchant cash advances, and invoice funding.

What's the best way to get funding when banks and lenders don't believe in our idea?

When it comes to funding your small business, there are a few important considerations to keep in mind:

  1. Ownership and control of your business.
  2. Interest rates and financing fees.
  3. How repayment is structured.
  4. Protecting your personal assets.

Consider the potential impact of creating new debt or giving up some ownership or control of your business. There’s even greater risk in putting your personal assets up as collateral. Alternative finance companies are giving small businesses more and better funding options by using technology to find efficiencies. With FundThrough’s invoice funding app, for example, you can raise capital using revenue you’ve already earned.

What's the difference between traditional and alternative business funding?

There are a few key differences between traditional and alternative business funding:

  1. Traditional funders generally want to see that you are an established business with a lengthy, positive business and personal credit history. Alternative funders are open to evaluating your fundability using different criteria.
  2. Traditional funding can takes weeks or months to secure, while alternative funding like invoice factoring can be available in just a few days.
  3. Traditional lenders will likely want to evaluate your personal credit score as well, while alternative lenders are looking at other factors in evaluating your application.

What are my options for short term business funding?

If you’re operating an established business with stable, steady cash flow and have great credit, you might consider a bank loan. The odds aren’t in your favour, considering that over 80% of small business loan requests are turned down by banks. Only half of applicants will receive anything at all, according to the Federal Reserve Bank of Cleveland, and it may not be near what you need to keep your business afloat.

For short term funding, invoice factoring can’t be beat. It enables you to put cash you’ve already earned to work for your business right away, rather than waiting weeks or months to get paid. Invoice factoring also negates the need for taking on new debt, paying high interest or finance fees, or giving up an ownership stake in your business.

Can companies get a cash advance?

Absolutely, but make sure you understand all associated fees, terms and conditions, and interest. Traditionally, companies that offered invoice factoring would purchase your invoice, advance you about 80%, and go collect from your clients. There are a lot of companies out there today that operate more like payday lenders, advancing your funds but charging extremely high interest rates.

Use a reputable invoice factor like FundThrough to have invoiced funds advanced to you. You pay one simple fee: 0.5% on the amount funded, with no additional service fees or interest charges. Repayment takes place over 12 weeks, and you can reduce the fee with early repayment. Calculate the total cost of invoice funding here for free.

How can I calculate the cost of a bank loan?

To calculate the cost of a bank loan, you’ll need to know the amount being borrowed, the length (term) of the loan, and the interest rate. A simple online calculator like this one offered by allows you to plug in your figures and see how much a bank loan will cost.

Where can I find a business loan rates calculator?

For more complex business loans, try this online calculator that allows you to choose different interest types, additional fees, repayment schedules, etc. As you can see, business loans can get complicated – if you qualify.

Is there an alternative to a bank loan for financing my equipment?

Yes! Invoice funding is a smart, proactive alternative to bank loans that can help improve your cash flow and prevent cash flow gaps, finance new equipment or inventory, hire new talent and more. You don’t need to jump through the hoops of traditional lenders or worry about high interest charges and hidden fees, either. Learn more about how invoice factoring works here.

How do I calculate the total cost of each of my financing options?

Use the calculators listed above to compare your financing options. You should also factor the following into your funding decision:

  • What do I need to do to qualify?
  • How long will it take to access the funds?
  • How will this affect my business in the long term?

Learn more about how FundThrough works and why business owners chose invoice factoring to finance their businesses here.

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