Comparing 3 Alternative Business Financing Solutions

August 11, 2023 | Tools & Tips

When it comes to getting alternative business financing, traditional bank loans or venture capital isn’t always an option. Whether it’s due to cashflow issues, bad credit, or having no collateral it can seem frustrating, but there are other options.

No Collateral Loans / Lines of Credit

A no collateral loan or line of credit doesn’t require a credit check or any assets as collateral. They generally ask for your last 3-6 months of bank statements and can fund in as little as 24 hours. If you’re in a pinch and need quick funding, this can be an option, but you will have a shorter repayment period, daily or weekly repayments, and pay as much as 35% in interest.

Merchant Cash Advances (MCA)

A traditional merchant cash advance (MCA) provides an upfront sum of cash and takes a daily or weekly percentage of your debit and credit card sales until the advance is paid in full. If you have very consistent sales this could work for you, but if your sales fluctuate you could end up paying more one month since there’s no maximum on how much you can pay back in each month.  

Revenue-Based Financing (RBF)

Revenue-based financing (RBF), also known as sales-based financing, is a type of funding for businesses that provides access to an upfront sum of working capital in exchange for a portion of the business’s future revenue. The business then remits payment to the RBF provider according to the payment schedule (typically daily or weekly), until a total amount, agreed to upfront, has been paid in full. The total amount to be remitted is determined through underwriting based on the amount of funding provided and the business’s financial situation, such as monthly revenue, expected growth, and time in business. The percentage of revenue remitted is usually fixed at the time of the agreement. 

Depending on your situation you may find one type of alternative business financing is favorable, but for many small businesses we recommend revenue-based financing as payments can fluctuate with your revenue and won’t leave you buried if times get slow.

Learn more about alternative business financing