Alternative Lending: What It Is, Best Companies

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 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.

» MORE: Should you get an online business loan or a bank loan?

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^[0]

If you’re considering an alternative business loan, here are NerdWallet’s picks for the best lenders.

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 18 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.

» MORE: Best business loans for bad credit

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 6 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 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 $50000 in annual revenue. You only need a 620 credit score to qualify.

» MORE: What are CDFI loans?

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.

» MORE: Best large business loans for $500,000+

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 $250000 with repayment terms up to 6 months. Bluevine can also work with startups or businesses with bad credit, requiring just a 625 credit score and 12 months in business.

» MORE: Best fast business loans for quick cash

OnDeck offers both short-term loans and lines of credit, giving you flexibility in how you borrow.

Its term loan goes up to $250000 with repayment terms up to 24 months. The lender’s line of credit, on the other hand, is available up to $100000 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, 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.

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^[0]

» MORE: Compare the best private business loans

Frequently asked questions