Bank Loans vs Alternative Business Funding

  • August 5, 2019
  • By Aidan Dwyer

There comes a time when every small business owner considers taking on additional financing for their business. Whether it’s for business expansion or just a little extra working capital to hold your business over, financing can go a long way for your small business. When you think about financing options for your small business, the first thing that comes to mind is traditional bank loans. But recently, alternative lending has come into prominence as a new form of lending. Both alternative lending and traditional bank loans have their pros and cons. Any one of the lending options may better suit your business needs. Below we are going to discuss the differences between bank loans and alternative lending. So that you can be better educated when making financial decisions for your small business. 

The Time it Takes to Receive Funding

Getting a traditional bank loan can be a long process, even after you submit all of the necessary documents. You still may have to discuss your application and qualifications with a representative from the bank. All in all, the loan process from a traditional bank can take from two weeks all the way up to a month to receive funds.

On the other hand, the funding process through an alternative lender is much quicker. In most cases, the application process is online and you will hear back from the lender within a matter of hours. If you are qualified for financing, you may be able to receive funding in as little as 24 hours.


When you apply for any form of financing, there are a couple of different things that are used to qualify your business for a loan. The most common examples of this are credit score, time in business, and monthly revenue. Other than this it also includes other factors such as business cash flow and industry parameters. 

Generally speaking, banks will have stricter qualification requirements than alternative lenders. A bank may require that your business is operational for two or three years. Whereas, an alternative lender may only require six months in business. Additionally, banks require a credit score of at least 700, while alternative lenders can often offer financing to business owners who have less than stellar credit.

Interest Rates

When comparing financing options, often the most important deciding factor is the interest rate that you will repay the loan amount at. Banks generally offer lower interest rates than alternative lenders and offer true APR amortizing loan options. This is often because they have a lot of capital to lend from. Alternative lenders loan money from a variety of sources, which makes the cost of lending higher than typical banks. Many alternative options do not function as loans with traditionally accrued interest, but offer flat cost and payback on financing options. This ensures transparency when funding, and makes terms of the option much clearer to the merchant. 

Banks can also offer longer paybacks that only occur each month due to their high qualification standards. Depending on the type of financing you are offered and your qualifications. Some alternative lenders may be able to get you financing with monthly payment, but also offer options with daily or weekly payment between 6 and 18 months. 

In conclusion, both alternative lenders and traditional banks have their pros and cons. Among these one may be a better financing option than the other. It is all dependant on the nature of your financing needs and your qualifications. Here at REIL Capital, we offer a variety of financing options to suit every business needs. If you would like to see what financing options are available for your business, fill out our commitment free application.

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