November 24, 2021

5 loan alternatives to turn to when banks let you down


Banks no longer have a monopoly in the lending market. More and more business owners are turning to bank loan alternatives because they simply don’t qualify for traditional funding. Small and midsize businesses are especially prone to falling into this funding gap, causing many startup founders to finance their business through non-traditional sources. Increasingly, though, business owners aren’t turning to alternative lending as a last resort, but rather because it’s the better option. 

Did you know…

  • According to a recent study from Oracle, over 40% of consumers believe non-banks offer more funding options compared to banks.
  • Banks have an approval rate of around 58% for small business applications, whereas alternative lenders approve founders at a rate of 71%.
  • Based on a report from Morgan Stanley, alternative lenders streamline the process for borrowers, especially those who have been underserved by traditional lending institutions.

Why are loan alternatives popular in the business community?

Today, there are a number of alternatives to bank loans available to you. Alternative lending includes any financing occurring outside of the conventional financing infrastructure. Alternative lenders tend to be more flexible—both in terms of the application process and the repayment structure—and have a faster turnaround. For cash-strapped startups looking to secure growth capital quickly, loan alternatives can often be a Hail Mary. 

But with increasing frequency, businesses of all sizes are turning to alternative lending as their premier choice for funding. This is because non-traditional financing tends to deliver funding within days—not weeks, which is often the case with banks. 

Beyond that, the application process for alternative lending is often simpler, and doesn’t require a credit check nor a personal guarantee as collateral. This can be very appealing to business owners without any credit history, poor credit, or a less-than-stellar financial relationship with their bank. 

Another reason business owners turn to alternative lending as a first choice for funding is because they are more likely to offer small amounts compared to banks, which often stipulate minimum lending terms that are simply too high for small businesses to repay. On top of that, many alternative lenders offer unconventional terms for repayment, allowing businesses to leverage assets like their accounts receivable (invoice financing) or credit card sales (merchant cash advances)—more on that later.

How to fund your business with loan alternatives

Alternative lending is a diverse space in which many types of funding are available to suit the needs of nearly every business. We’ve outlined some of the most common bank loan alternatives: 

Lines of credit

This type of lending refers to a fixed amount of money in which an alternative lender extends to a business owner. Just like one from a bank, you can draw from the line of credit up to the agreed-upon fixed amount, while paying interest on the amount loaned. Many founders began their entrepreneurship journeys by taking out a line of credit from friends or family, or from various online lenders.

Merchant cash advances

The idea behind a merchant cash advance (MCA) is to offer funding upfront in exchange for a business’s future credit card sales. Think of this form of alternative lending as a lump sum that is eventually paid back through a percentage of your company’s daily credit card revenue. 

Learn more about MCAs and whether they might be right for your business. 


Like the name suggests, microfinancing (or microloaning) is a bank loan alternative in which low value loans are offered. This type of funding came about in part because of banks’ refusal to offer business owners smaller amounts of money, usually less than $50,000. For small business owners in particular, $50,000 can be the difference between keeping your (virtual) doors open and having to shut them. 

Asset-based loans

Unlike bank loans, asset-based loans (sometimes referred to as bridge loans) are a short term cash infusion backed by an asset, as opposed to a credit score. This means offering up an asset, like property, for example, as collateral for the bridge loan. Examples of other assets offered up as collateral include:

Are loan alternatives right for my business?

Many types of alternative funding are available to businesses needing funding in a short period of time. Whether it’s because you don’t meet the criteria for securing a bank loan or because you aren’t comfortable asking for money from friends or family, loan alternatives are plentiful. It comes down to finding the right one for you and the needs of your business. 

Alternative lending offers the following advantages:

  • A simplified application process with less paperwork and less rigorous approval requirements compared to traditional lending institutions
  • Quicker approvals, with funding available in as little as a single business day in some cases
  • Increased flexibility, with unique financing options and room to negotiate repayment terms

How Clearco offers an alternative to loans

The alternative lending landscape is a diverse tapestry of funding options to suit the needs of all businesses. At Clearco, we provide alternative lending to founders who want to grow their business, without giving up on ownership. We don’t ask for a credit check, nor personal guarantee, nor equity. Looking for funding but aren’t sure how much you qualify for? Find out how much you could secure with our funding calculator.