Alternative financing is funding for businesses excluding traditional bank financing, enabling businesses the flexibility and optionality for funding that they may not have had previously. Outside of banks, there are usually more options and greater flexibility for businesses to utilize funding that suits their needs and allows them to use things like future revenues, invoices and assets as leverage to accommodate their financing requirements.
Traditional banks are more black and white when it comes to how they look at funding, and much less risk averse. For example, if your business has had a past of slow receivables or not ideal credit history, alternative financing can help your business to sort out cash flow issues.
For businesses that are newer and do not have two years of financial history, they would be able to leverage alternative financing for options to help get their business off the ground faster than traditional institutional financing.
Here are some examples of alternative financing:
- Invoice factoring or financing
- Revenue based financing
- Merchant cash advance financing