Just because something is popular doesn’t necessarily mean it’s good for your business, but it can be a great sign. That’s the case with many alternative financing options. Not all lenders offer the best terms, but many do provide incredible financing with benefits for today’s business owners. This guide can help you analyze the pros and cons to decide.

What Is Alternative Financing?

What qualifies as alternative lending? It relates to any financing not offered by traditional banks and other financial institutions. Alternative financing options are generally provided by private lenders.

This category is pretty huge, so it’s helpful to narrow things down a bit. Some alternative lenders provide a wide range of funding, from equipment loans to real estate loans. Others specialize in one type of funding, such as invoice factoring.

You can’t always tell the difference between traditional loan terms and alternative loan terms, but alternative programs are generally more flexible and accessible. Instead of a long list of requirements, there may only be a few qualifiers.

What Do Alternative Financing Programs Mean?

If you’ve never heard of some of the types of alternative lending, you should take the time to learn more. These financing options tend to be narrow, which means each one excels at certain things.

For example, equipment financing focuses completely on helping you purchase or lease equipment. You don’t need outside collateral to qualify; the equipment works as collateral for the loan and lowers the requirements automatically.

Bridge loans are another popular type of alternative lending. They provide funds based on the value of business assets. These short-term loans help companies purchase inventory, flip real estate properties or improve cash flow.

Invoice factoring is similar to a working capital loan or cash advance. It helps businesses that have poor cash flow because of customers that take a long time to pay. There are also merchant cash advance programs, lines of credit, and countless other fast and flexible options for business owners.

What Are the Benefits?

These loans don’t require excellent credit ratings, amazing revenue, or perfect credit histories. Even companies that have gone through bankruptcy can qualify as long as they have the right assets or business needs. Startups also benefit immensely because they don’t need to meet a minimum time in business.

Alternative real estate loans can be ready to go in a week or two. Compare that to the months-long process of traditional loans and it’s not surprising with alternative lenders are so popular.