Alternative lending, also called online or fintech lending, refers to any loan offered by a nonbank lender. These lenders don’t take deposits and typically work fully online. They use technology to review applications and make faster lending decisions.
As a result, alternative business loans are often easier to qualify for and fund faster than traditional small-business loans.
The catch? You may face higher interest rates and shorter repayment terms, which means larger payments.
How much do you need?
We'll start with a brief questionnaire to better understand the unique
needs of your business.
Once we uncover your personalized matches, our team will consult you
on the process moving forward.
How does alternative lending work?
In general, alternative lenders operate online, using technology to review applications and approve different types of business loans quickly. While traditional lenders tend to rely on manual review processes, alternative business lenders often use digital data sources — such as bank accounts, merchant accounts or accounting software — to assess your creditworthiness.
Some nonbank community organizations, like community development financial institutions (CDFIs), also fit this category.
Alternative lenders might:
- Lend their own money directly to small businesses.
- Connect borrowers with investors.
- Partner with banks to issue loans.
Common types of alternative business loans
Here are the most popular types:
- Term loans: Lump sums of cash that you repay over a set period of time, with interest.
- Business lines of credit: Revolving credit that lets you draw funds as needed, up to a limit. You pay interest only on what you use.
- Equipment loans: Term loans used to buy equipment, which usually serves as collateral.
- Invoice factoring: Financing that involves selling unpaid customer invoices to a third-party company, which then collects from your customers.
- Merchant cash advances (MCAs): Funding based on your business’s future revenue. MCAs are costly and are best left as a last resort.
Differences between traditional and alternative lending
Alternative lenders typically offer faster approvals and simpler applications. But this convenience usually means higher interest rates and shorter terms.
If you can qualify, traditional lenders (like banks and credit unions) usually offer lower rates and longer repayment terms.
Here’s an overview of the differences between traditional and alternative lending.
| Traditional lending | Alternative lending | |
| Type of lender | Banks and credit unions. | Online and fintech lenders. |
| Eligibility requirements | Strict eligibility requirements. May require multiple years in business and excellent credit. | Flexible eligibility requirements. May work with startups or businesses with bad credit. |
| Loan amounts | Larger loan amounts. | Smaller loan amounts. |
| Interest rates | Average interest rates range from 6.8% to 11%. | Average interest rates range from 14% to 99%. |
| Repayment terms | Typically 60 months. Often require monthly payments. | Typically several months to two years. Often require daily or weekly payments. |
| Application process | May need to apply in person. Applications can require lots of paperwork. | Usually can apply online or over the phone. Applications often require minimal paperwork. |
| Funding speed | Generally slow to fund; may take several weeks. | Generally fast to fund; may receive approval and access to capital in as little as 24 hours. |
| Customer support | In person, over the phone or online. | Mostly online or over the phone only. |
Top alternative lenders for small businesses
According to survey data from a 2025 Federal Reserve report, small-business owners apply to alternative lenders almost as often as large banks — and more often than small banks.
If you’re considering an alternative business loan, here are NerdWallet’s picks for the best lenders.
| Product | Min Credit | Min Time In Business | Max Loan Amount | |
|---|---|---|---|---|
 Fora Financial - Online term loan Nerdwallet Rating with NerdWallet Small Business | 570 | 6 months | $1,500,000 | with NerdWallet Small Business |
 Fundbox - Line of credit Nerdwallet Rating with NerdWallet Small Business | 600 | 3 months | $250,000 | with NerdWallet Small Business |
 Accion Opportunity Fund Small Business Working Capital Loan Nerdwallet Rating with NerdWallet Small Business | 620 | 12 months | $250,000 | with NerdWallet Small Business |
 Rapid Finance - Online term loan Nerdwallet Rating with NerdWallet Small Business | 650 | 3 years | $1,000,000 | with NerdWallet Small Business |
 Bluevine - Line of credit Nerdwallet Rating with NerdWallet Small Business | 625 | 12 months | $200,000 | with NerdWallet Small Business |
 OnDeck - Online term loan Nerdwallet Rating with NerdWallet Small Business | 625 | 12 months | $400,000 | with NerdWallet Small Business |
 iBusiness Funding - Online term loan Nerdwallet Rating with NerdWallet Small Business | 660 | 24 months | $500,000 | with NerdWallet Small Business |
Fora Financial
Best for: Bad credit
Fora Financial is a good option for businesses with bad credit, as borrowers can qualify with a credit score as low as 570.
The alternative lender offers working capital loans that range from $5000 to $1.5 million and terms up to 24 months. Once you’ve applied for a loan, Fora may be able to give you a decision within four hours and provide funding within 24 hours from approval.
Fundbox
Best for: Startups
You may be able to qualify for a business line of credit from Fundbox with only 3 months in business. Lines of credit are available for up to $250000 with repayment terms between 3 or 24 months.
Fundbox can be another solid option if you have bad credit, as you may qualify with a minimum credit score of 600.
» MORE: Best startup business loans
Accion
Best for: Minority- or women- owned businesses
Accion is a nonprofit, CDFI lender that provides business loans to underserved communities, such as women- or minority- business owners. It offers loans up to $250000 for businesses at least 12 months old with at least $100000 in annual revenue. You only need a 620 credit score to qualify.
» MORE: What are CDFI loans?
Rapid Finance
Best for: Large loan amounts
Rapid Finance offers term loans up to $1 million. You only need a 650 minimum credit score to qualify; however, you’ll need at least 36 months in business and a minimum of $120000 in annual revenue.
Bluevine
Best for: Fast funding
With Bluevine, you can apply for a business line of credit and get approved in minutes. Once approved, funds may be available within 24 hours.
Lines of credit go up to $200000 with repayment terms up to 12 months. Bluevine can also work with startups or businesses with bad credit, requiring just a 625 credit score and 12 months in business.
OnDeck
Best for: Loan options
OnDeck offers both short-term loans and lines of credit, giving you flexibility in how you borrow.
Its term loan goes up to $400000 with repayment terms up to 24 months. The lender’s line of credit, on the other hand, is available up to $200000 with repayment terms of 12, 18 or 24 months.
Regardless of the option you choose, OnDeck can fund loans as quickly as 24 hours.
» MORE: Business loan vs. line of credit
iBusiness Funding
Best for: Repayment terms
iBusiness Funding, which acquired Funding Circle in 2024, offers business loans with competitive interest rates and repayment terms. You can get loans up to $500000 with monthly payments and terms up to 60 months. There are also no prepayment penalties for paying your loan back early.
It’s a strong choice for well-established businesses, since its eligibility requirements are higher than most others on this list. For example, you’ll need a minimum credit score of 660 and at least 24 months in business.
How to choose an alternative lender
Alternative business lenders aren’t bound by the same laws and regulations that govern banks. Instead, they’re regulated by a mix of federal, state and self-imposed guidelines.
That means it’s important to do your research to avoid predatory lenders that use misleading terms or deceptive tactics.
Here are some tips to protect yourself:
- Plan ahead for funding. If possible, apply before you desperately need money. When you’re in a rush, it’s easier to overlook red flags or take the first offer you’re approved for rather than shop for the best, most affordable option.
- Watch for unclear lending policies. Reputable lenders should be upfront about their process, loan terms and APRs. If you’re having trouble getting straight answers or if the business loan agreement is unclear, consider this a red flag.
- Use trusted sources. When possible, look for lenders through trusted resources, like government websites. For example, New York state has a lender directory to help you find alternative lenders. You can also turn to reputable loan brokers or business lending marketplaces, like NerdWallet.
- Do your homework. Before signing on the dotted line, do as much research as possible. Ask your network for recommendations, visit each lender’s website and read online reviews.
You're in good hands with NerdWallet
NerdWallet carefully vets each business lender featured on our site. So you can rest easy knowing that these companies follow fair and responsible lending practices. Our business loans writers and editors are small-business specialists who thoroughly research each company before making recommendations.
Is alternative lending right for my business?
Alternative lending can be a good option if you can’t qualify for traditional bank loans. For example, if your business is still new or you have bad credit. It’s also useful if you need fast cash and don’t mind paying higher rates.
If you can qualify for a bank or SBA loan, however, those will likely be the most affordable options. Traditional lenders can be a better choice if you’re looking for larger loan amounts, longer repayment terms and low interest rates.
And if you already have a relationship with a bank or credit union, that can also help. In particular, small community institutions often approve more loans and higher borrower satisfaction.
Frequently asked questions
What is an example of alternative financing?
Alternative financing includes any nonbank funding for small businesses. This includes online loans, invoice factoring and merchant cash advances. It also includes non-debt options, like grants, angel investors or crowdfunding.
Do alternative lenders give high or low interest loans?
While it depends on the lender, your personal finances and your business, interest rates from alternative lenders are usually higher than what traditional lenders can offer. That’s usually because they make higher-risk or shorter-term loans.
What’s the difference between alternative and traditional loans?
Alternative business loans are easier to qualify for and fund faster, but they often have higher interest rates and shorter repayment periods. Traditional loans are harder to get but typically come with better rates and terms.
Article sources
NerdWallet writers are subject matter authorities who use primary,
trustworthy sources to inform their work, including peer-reviewed
studies, government websites, academic research and interviews with
industry experts. All content is fact-checked for accuracy, timeliness
and relevance. You can learn more about NerdWallet's high
standards for journalism by reading our
editorial guidelines.
- 1. Fed Small Business. 2025 Report on Employer Firms: Findings from the 2024 Small Business Credit Survey. Accessed Nov 12, 2025.
