Banks won’t lend? Use these guys instead

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Banks won't lend? Use these guys instead


alternative lending can capital
alternative lending can capital
  • Financing type: Loans and merchant cash advances

What it is: CAN Capital's merchant cash advance program gives business owners access to future revenue that is paid back in small daily remittance fees. There's no fixed payment plan, rather the amount owed each day is based on that day's sales.

Four years ago, CAN Capital introduced its business loan product, which is also paid back daily. The rate is fixed and is based on a company's risk profile (including things like industry, business credit and seasonality).

Who it's best for: Restaurant owners needing extra funds to put toward expansion costs that will increase revenue in the near future.

Potential pitfalls: Mitchell D. Weiss, adjunct professor of finance at the University of Hartford, says businesses must be careful about accepting merchant advance funds -- even from a venerable company.

"You've taken next month's cash flow and you're getting it now. At any point, if you stop doing this, you have a hole," explains Weiss.

He suggests using a simple annual percentage rate, or APR, calculator, like this one from efunda.com to get the real interest rates.

Financing amounts: $5,000 to $150,000 (merchant cash advance); $2,500 to $250,000 (loans)

Interest & fees: No fixed interest rate (MCA); 9.9% to 30% plus additional fee (loans)


alternative lending club
alternative lending club
  • Financing type: Fixed-term loans from peers

What it is: Lending Club has offered personal loans since 2007 and launched a small business platform in March 2014. In a peer-to-peer virtual marketplace, entrepreneurs who have been in business for at least two years borrow from investors -- individuals or companies -- for anywhere from one to five years. Lending Club loans have fixed interest rates that vary depending on the business' risk.

Who it's best for: Credit-worthy businesses with many years of experience get better deals than less established companies that look weaker financially. There's also an "origination fee," a onetime fee paid upfront that can range from 1% to 6% of the loan and depends on one's credit worthiness and term length.

Potential pitfalls: Even if interest rates and fees seem clear, it's important to pay attention to the fine print.

"Focus on the default and remedies clauses," advises Weiss. "If you miss a payment, do you have an opportunity to remedy it?"

Financing amounts: Up to $100,000

Interest: 5.9% to 29.99%

Other peer-to-peer options:Funding Circle -- The UKcompany opened a U.S. arm last fall. Loans go up to $500,000 and rates are between 9.9% and 20.9% plus a 2.99% origination fee.


Banks often have exhaustive approval processes, high minimums, and flawless credit requirements. But there's a wealth of non-bank alternatives for those who need capital fast. Here are some of the leaders.

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alternative lending fundbox
alternative lending fundbox
  • Financing type: Advanced cash flow

What it is: Fundbox lets contract workers (think carpenters, plumbers, freelance writers) cash in on their invoices before actually receiving payment. It connects to a business' accounting software and essentially buys outstanding invoices. Customers pay back the amount, plus interest, in weekly payments. Exact fees are based on the specific invoice amount.

Who it's best for: Contract workers who are waiting to be paid for an invoice. Small invoice amounts see lower fees but according to Eyal Shinar, CEO of Fundbox, most customers are cashing in invoices around $1,000 and 90% of customers come back on a weekly basis.

Potential pitfalls: Interestmay be low but they can add up over time. Be wary of taking out too many invoices too often. A 2% fee runs up an annual percentage rate of 24%.

Financing amount: Varies

Interest & fees: 0.7% to 2.7%


Banks often have exhaustive approval processes, high minimums, and flawless credit requirements. But there's a wealth of non-bank alternatives for those who need capital fast. Here are some of the leaders.

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alternative lending square
alternative lending square
  • Financing type: Merchant Cash Advance

What it is: Mobile payment company Square launched its Square Capital initiative last October to help small businesses with financing. There's a flat fee up front that's paid back daily(which usually works out to about 10% to 14% of the advance).

Who it's best for: Merchants using Square who are looking to grow their business (and want to avoid the lengthy bank application process). Square approaches its customers, not the other way around.

Potential pitfalls: Only businesses that know "with certainty" that they're just having a slow period should accept merchant cash advances, says Manny Skevofilax of Portal CFO Consulting. In fact, he strongly warns his small business clients against alternative financing providers.

"It sounds great and sexy when you're an entrepreneur, but it's really not good for your financial health," he says.

Financing amounts: No set minimum or maximum

Fees: Flat dollar fee varies depending on advance

Other merchant-specific options: PayPal Working Capital-- PayPal also offers its vendors a unique financing alternative: merchants can borrow up to 8% of their yearly revenue (up to $20,000) through the program. Clients choose what percentage of daily PayPal sales they'll use to repay the loan. Loans have flat fees based on the amount borrowed, the repayment plan and one's PayPal sales history.


Banks often have exhaustive approval processes, high minimums, and flawless credit requirements. But there's a wealth of non-bank alternatives for those who need capital fast. Here are some of the leaders.

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alternative lending on deck
alternative lending on deck
  • Financing type: Term loans

What it is: OnDeck offers loans of up to $250,000 for established small business owners for terms of up to two years (though the average is one year).

Who it's best for: Businesses with a minimum annual revenue of $100,000 that have been in business for at least a year and have a minimum credit score of 500. The vast majority of customers (95%) have a separate business location outside their home. According to Noah Breslow, CEO of OnDeck, businesses use their fundsto grow their company -- whether that's buying assets, remodeling, expanding or opening a new business.

Potential pitfalls: Evaluate the total cost of the loan -- including the annualized interest rate. OnDeck interest rates are presented as between .17 cents and .33 cents on every dollar -- but what does that mean when considering the overall loan amount? Calculate it.

Financing amounts: $5,000 to $250,000

Interest & fees: $.17 to $.33 on every dollar plus origination fee (2%-2.5% of the loan amount)


alternative lending kabbage
alternative lending kabbage
  • Financing type: Working capital

What it is: Kabbage offers working capital loans of up to $100,000 to business owners, who can apply and be approved in under ten minutes. When it launched in 2011, Kabbage initially focused on online merchants that sell products on sites like eBay (EBAY, Tech30) and Etsy. But now, more than 40% of their business is done with offline companies.

Who it's best for: Small businesses with a one-year history, annual revenue of $60,000 and faith in computer algorithms.Kabbage is the only provider with a fully automated approval process. It uses over 100 factors -- everything from revenue history to seasonality -- as part of its "secret sauce" to determine financing amounts said Victoria Treyger, CMO of Kabbage.

Potential pitfalls: Again, understanding the APR is essential to putting the loan into context. Once approved, customers are able to determine if they want to take out a lump sum or break up the loans. The interest rate is between 1% to 13% for first two months. After that, the interest rate decreases to 1%, so it makes sense to take out one larger sum, not several smaller loans.

Still, it is in a customer's best interest to pay it off as soon as possible. One percent may sound low for months three through six, but customers will end up paying less if they pay off the loan earlier.

Financing amount: $500 to $100,000

Interest: 1% to 30%


Banks often have exhaustive approval processes, high minimums, and flawless credit requirements. But there's a wealth of non-bank alternatives for those who need capital fast. Here are some of the leaders.

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alternative lending lendio
alternative lending lendio
  • Financing type: Varies

What it is: A mediator between business owners and lenders, Lendio features a variety of different options, varying from peer-to-peer loans, SBA loans, cash advances and more.

Since launching in 2006, they've worked with "hundreds of thousands" of businesses who use the platform for free. Lendio gets paid by the lender for referring customers (the amount varies depending on the company).

Lendio works with hundreds of different lenders which it vets before adding to its platform. They use an automated process to suggest about four different options that suit the needs of a borrower and then connects borrowers with providers.

Who it's best for: "Restaurant owners, gas station [operators], dry cleaners -- they are very busy juggling payroll, employees and hiring, inventory," said Lendio founder Brock Blake. "They don't have time to go out and be an expert at all the different loan options that are out there."

Potential pitfalls: As with any real estate broker, it's an intermediary business. Though the service is 100% free for business owners, not every option out there is available on Lendio's platform. Lendio says they don't give preferential treatment to any one provider on their platform (which compensate Lendio in different ways, from lead generation to percentage fees of loans).

Financing amounts and interest: Varies


Banks often have exhaustive approval processes, high minimums, and flawless credit requirements. But there's a wealth of non-bank alternatives for those who need capital fast. Here are some of the leaders.

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