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Alternative lending institutions and financial marketplaces provide bank-related services through digital platforms, usually with more flexibility. — Getty Images/ sturti

Some small business owners who need financing seek out a conventional bank loan, where they apply for funding through a lengthy process at their local bank. However, entrepreneurs also have the option of using nonbank lenders for short-term loans or cash advances.

Although these alternative lenders typically have higher interest rates and larger or more frequent payments, they also tend to have less strict requirements and more loan term flexibility, making them attractive options for new startups. If your company needs funding and you don’t want to go through the traditional business loan process, here are 10 alternative lenders to consider.

Fundbox: Easiest nonbank lending application

Fundbox is an online lending platform offering short-term lines of credit and loans. Business owners make weekly payments based on term lengths of 12 or 24 weeks for lines of credit and 24 or 52 weeks for short-term loans.

Fundbox doesn’t charge a penalty if you pay off your loan early and there aren’t any origination fees. The application process is more accessible than some alternative lending platforms because applicants connect their accounting software or business checking account. Fundbox uses this information to approve or deny your application within minutes.

Once approved and finalized online, nonbank lenders may transfer funds to the business account as soon as the next business day.

The minimum requirements include:

  • $100,000 in annual revenue.
  • Six months in business.
  • A personal FICO score of 600 or higher.
  • A business checking account.

[Read more: How to Apply for a Small Business Loan for Your Startup]

Fora Financial: Offers early payment discounts

Fora Financial is a direct lender of working capital and provides two products: small business loans and merchant cash advances. Loan terms may extend up to 15 months, whereas the MCA terms and payment amounts vary based on the business’s revenue. Fora Financial stands out from other lenders because it offers early payment discounts.

Business owners must complete a one-page application and upload three months’ worth of credit card statements through the online portal. The approval process takes 24 hours or less, and business owners can receive funds in as little as 72 hours.

Companies can’t have any open bankruptcies to secure funding and must have been in business for at least six months. Additionally, the company needs either $5,000 in credit card sales or $12,000 in gross sales to qualify.

BlueVine: Best for startups

BlueVine is a financial technology company that provides banking services such as invoice factoring, lines of credit, and the Small Business Association (SBA) Paycheck Protection Program (PPP) loans. Revolving lines of credit terms are for six or 12 months, while PPP and invoice factoring (aka factoring receivables) terms vary.

The applications take five to 10 minutes to complete. Companies can connect their accounting software or business checking account, or they can upload invoices to the online portal. Approvals occur in 24 hours or less.

Business to business (B2B) startups with at least three months in business, a minimum FICO score of 530, and $10,000 in monthly revenue can apply for an invoice factoring loan. Lines of credit require a minimum FICO score of 600, six months in business, and $10,000 in monthly revenue.

SBG Funding: Same day funding is available

SBG Funding is a business financing firm offering three loan products: term loans, lines of credit, and equipment loans. Business owners benefit from same-day funding and no prepayment penalties.

Additionally, SBG Funding offers longer terms than other nonbank lenders:

  • Term loans: six months to five-year terms with biweekly or monthly payments.
  • Lines of credit: six months to 24 months.
  • Equipment loans: one- to 10-year payment terms.

The minimum requirements are $10,000 in monthly revenue, six months in business, and a FICO score of at least 500. The application and approval process takes place online, and business owners must submit three months of bank statements.

Accion: Custom terms and a small business focus

Accion is a nonbank lender and the only nonprofit organization on this list of alternative financial institutions. It specializes in microlending and focuses on small businesses. Accion provides loans through its Opportunity Fund and tailors funding terms to the needs of individual companies.

In addition, there aren’t any prepayment penalties, and Accion offers coaching and access to a support network. The application takes roughly 15 minutes to complete and requires business owners to enter revenue and expenses from their tax returns manually.

The minimum requirements of the business and owner include:

  • Business must be in operation for at least 12 months.
  • Owner must own at least 20% of the company.
  • Business generates at least $50,000 in annual sales.
  • Owner must be 18 years of age or older.

A peer-to-peer (P2P) loan is when a borrower takes a loan from a nonfinancial institution. LendingClub is a P2P lender that offers financing without strict requirements, and it does so faster than a bank issues a loan.

QuickBooks Capital: No origination fees, prepayment penalties, or hidden charges

QuickBooks Capital is a service that provides small business loans to eligible QuickBooks customers. They offer funding by directly underwriting loans and providing a marketplace for small businesses to match with curated lenders.

When reviewing loan applications, QuickBooks Capital looks at a business’s history, use of QuickBooks, personal and business credit history, and current liabilities. For small businesses to get approved, they need a credit score of 580 or higher and a minimum of $50,000 in revenue over the past year. If approved, the loan is then generated through QuickBooks and not a third party.

For businesses that are searching for curated lenders, the QuickBooks Capital Marketplace is open to all customers who use QuickBooks Online or QuickBooks Desktop. Borrowers are able to see their various options and compare rates, all without their credit scores being affected.

OnDeck: Offers loyalty benefits

OnDeck is a small business loan provider that offers loyalty benefits for those who renew their funding contracts. For businesses to apply, they need to be in business for one full year and have a minimum credit score of 600, an annual gross revenue of $100K, and a business checking account. If a borrower extends their regular contract or takes out a new loan, OnDeck will waive the remaining interest on the existing loan, so long as the borrower has paid down 50% of the balance.

For some qualifying businesses, OnDeck also offers a prepayment benefit that waives the remaining interest on a loan if you pay it off before the end of its term. This benefit does, however, come with a higher interest rate.

[Read more: 3 Things to Do After You're Rejected for a Business Loan]

National Funding: Best for businesses with bad credit

Businesses that have poor, average, or nonexistent credit should consider partnering with National Funding. As a lender, they offer funding options for new applicants with credit scores as low as 475 for applicants who are renewing. They also do not require collateral for businesses that are taking out loans.

National Funding offers small business loans from $5,000 to $500,000, and up to $150,000 for equipment financing and leasing. If a business pays off its loan early, National Funding offers a 6% early payoff discount for equipment financing loans and a 7% early payoff discount for capital customers who pay off their balance within 100 days of signing their contract.

Lending Club: Best peer-to-peer loan

A peer-to-peer (P2P) loan is when a borrower takes a loan from a nonfinancial institution. LendingClub is a P2P lender that offers financing without strict requirements, and it does so faster than a bank issues a loan. Small businesses only need to be around for one year and have a minimum credit score of 580 and a minimum annual revenue of $50,000. LendingClub does, however, require collateral on any loan over $100,000 and has a higher ordinance fee of up to 8.99%.

Newtek: Nonbank SBA loan

Newtek is a business lending solution that offers SBA loans as a nonbank. In fact, the organization is the only nonbank lender on the SBA’s top 100 list of most active 7(a) lenders. To get an SBA loan, Newtek requires small business owners to prequalify for a term loan, line of credit, or commercial real estate loan. Business owners then discuss with the borrower what their options are and what financing is the best fit for their situation. Newtek offers loans from $1,000 to $10 million for terms as long as 25 years, but only offers loans to applicants that have been in business for a minimum of two years.

Choose the right nonbank lender for your company

Before exploring alternative lenders, you may wish to see if you qualify for small business grant programs. Doing so can improve your cash flow and help grow your business without you having to worry about paying back a loan.

However, if you need new equipment, have slow-paying customers, or want a safety net during seasonal downturns, use our small business funding guide to determine which loan type suits your needs.

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Published May 23, 2022