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

Conventional bank loans typically require in-person visits and lengthy application processes. Increasingly, small business owners are turning to nonbank lenders for short-term loans or merchant cash advances (MCAs).

Alternative lending institutions and financial marketplaces provide bank-related services through digital platforms. Typically, nonbank lenders give more loan term flexibility and less strict minimum requirements. Moreover, the process is reasonably fast. Most small businesses get a funding decision within a day and receive funds in under a week.

If your company needs funding, here are five 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.
  • 600 or higher personal FICO score.
  • Business checking account.

Fora Financial: Offers early payment discounts

Fora Financial is a direct lender of working capital and provides two products: a small business loan and a merchant cash advance. 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 as soon 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.

Accion is a nonbank lender and the only non-profit organization on this list of alternative financial institutions. It specializes in microlending and focuses on small businesses.

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, business checking account or 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 bi-weekly 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 non-profit 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 also 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 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.

Choose the right nonbank lender for your company

Before exploring alternative lenders, see if you qualify for small business grant programs. Doing so can improve your cash flow and help grow your business without worrying 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.

CO— aims to bring you inspiration from leading respected experts. However, before making any business decision, you should consult a professional who can advise you based on your individual situation.

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Published July 27, 2021