finance options - alternative business funding

Alternative business funding

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  • Access funding quickly, easily, and on terms that fit your business needs

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What is alternative business funding?

Alternative business funding is any way a business can borrow money outside of traditional banks. Business finance has evolved over recent years, with new and flexible options emerging. It has become a key option for helping small businesses that might find it hard to get support from regular lenders.

What is the difference between traditional vs. alternative funding?

Historically, businesses mainly went to high street banks for loans. Banks generally can offer large loan amounts and are seen as reliable, but getting approved often takes a long time and comes with strict criteria for businesses. Today, with many bank branches closing, the difference between traditional and alternative funding is less clear.

Alternative funding gives businesses quicker and easier ways to get money. It's a great option for companies that don't meet tough bank requirements or need cash fast.

What are the different types of alternative business funding?

There are several different types of alternative business funding available, each designed to meet unique business needs and circumstances. Here are some of the most common forms:

Peer to peer lending (P2P)

Peer to peer lending is a method of financing that allows individuals to borrow and lend money directly to each other using an online platform. Generally, this allows for more accessible loan opportunities for businesses and lower interest rates.

Invoice financing

Invoice financing allows businesses to sell their outstanding invoices to a third party at a discount. This arrangement helps businesses access immediate cash flow, which is crucial for maintaining operations without waiting for slow-paying customers.

Merchant cash advances

A merchant cash advance provides businesses with an upfront sum of cash in exchange for a portion of future sales, typically from credit card transactions. It’s a suitable option for businesses with high credit card sales volumes looking for quick funding.

Line of credit

Unlike traditional term loans, a line of credit allows businesses to draw funds as needed up to a set limit, providing flexibility to manage cash flow dynamically.

What are the advantages and disadvantages of alternative business funding?

  • Advantages

    • Businesses that might not qualify for bank loans because they're new or don't have enough collateral can often get alternative financing more easily.

    • These methods can provide access to capital much faster than high street banks.

    • Alternative financing can be more flexible, allowing you to pay back under terms that fit your business better, like choosing when and how much to repay.

    • Many alternative lenders use new technology to decide if you qualify for a loan, sometimes looking at other parts of your business besides just credit scores.

    • You can apply anytime as this is usually an online application process

  • Disadvantages

    • These loans can potentially come with higher interest rates and fees, making them more expensive than traditional bank loans.

    • Some financing options, like cash advances, could lead to a cycle of debt if not carefully managed, as you might need to borrow more to keep up with repayments.

    • The variety of available products can be confusing and hard to understand, making it tough to choose the right one for your needs.

How to choose the right alternative funding for your business?

Choosing the right alternative funding for your business requires a thoughtful assessment of your specific needs, projected future revenue, and the costs associated with various financing options.

Consider how your business processes payments - do you primarily use a card machine, or do you invoice your customers? Understanding your transaction methods can guide you in selecting the most suitable funding source.

With so many options at your disposal, starting your search might seem daunting. A platform like Capitalise can simplify this process. By submitting a funding application through Capitalise, you can compare different funding options tailored to your needs. You will be connected with multiple lenders that match your criteria, and a dedicated funding specialist will assist you in finding the perfect fit for your business.

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