What Are Some Alternative Funding Options for Small Businesses?

Some alternative funding options for small businesses include credit unions, community banks, angel investors and asset-based financing. Small businesses can use funds from these sources to start or expand operations, states Intuit.

Credit unions are non-profit institutions that lend money to new and small businesses to enable them grow. The operations of credit unions resemble those of community banks. These are small, local banks that lend money to startups that may have difficulty securing financing from larger institutions. Community banks require a strong personal credit and some collateral from first-time business owners seeking loans, claims Intuit. Angel investors are private investors who lend money to small businesses in exchange for ownership stakes in the financed businesses.

Established small businesses can also obtain funding from private lenders by using collateral, such as inventory and equipment, to secure loans. Businesses without accumulated assets can apply for loans from the Small Business Administration. Although the Small Business Administration loan program does not provide funding itself, it guarantees a portion of the loan so that businesses can easily borrow from private lenders. Small businesses can also use credit cards to secure loans. However, credit cards are risky because they usually carry high interest rates, states Intuit.