What is Alternative Financing?

Alternative Financing refers to non-traditional funding options outside of conventional bank loans or public stock issuance. These methods offer businesses, especially startups and SMEs, flexible and accessible capital sources.

Common Types of Alternative Financing

  • Invoice Financing: Borrowing against outstanding invoices.

  • Revenue-Based Financing: Repaying a loan as a fixed percentage of monthly revenue.

  • Peer-to-Peer Lending: Raising funds from individual investors via online platforms.

  • Crowdfunding: Collecting small amounts of capital from a large group of people.

  • Merchant Cash Advances: Receiving an upfront sum repaid via a portion of daily credit card sales.

Example

A SaaS startup secures $250,000 through a revenue-based financing agreement, repaying the loan as 5% of monthly revenue until full repayment.

Benefits

  • Faster approval and funding

  • Less reliance on credit history or collateral

  • Often customized for business cash flow patterns