Alternative Business Funding: Look into Specialist Loans

If your company needs a cash boost, a credit card is certainly an option. But it’s good to keep in mind there are many types of specialist business loans out there that could offer you a great alternative way to fund your business.

Caroline Ramsey, Hannah Harper, Brean Horne Last updated on 21 June 2022.
Alternative Business Funding: Look into Specialist Loans

​​Used wisely, credit cards can offer businesses flexibility and enhanced security when making purchases. But there may be times when a specialist business loan, designed to meet a specific need, could prove a better alternative to fund your business.

Below, we take you through several types of alternative business funding to consider – some of which you can compare on NerdWallet.

What is alternative business funding?

Alternative business funding – also called alternative business finance or financing – refers to funding sources, such as specialist loans, that may be viable alternatives to a traditional bank loan or business credit card for a company.

What are the different types of alternative business funding?

Some of the main types of alternative business funding include:

  • specialist business loans
  • start up loans
  • bridging loans
  • tax loans
  • cash advances
  • asset financing
  • invoice financing
  • peer-to-peer (P2P) loans

How do I get a specialist business loan?

The following simple steps can help you apply for a specialist business loan:

  • Compare what’s out there: Our business loans comparison section covers some of the credit types described in this article. It allows you to filter your search by type of loan – and then, using your turnover, available amounts and terms – to look at the various deals available.
  • Decide and apply: Applications can be made online or over the phone with the lender of your choice. Read more in our guide on how to prepare for a business loan application.
  • Wait for a ‘yes’: The decision can sometimes be made in minutes and the money could be in your nominated account within an hour or two, depending on the lender and type of loan.

Start up loans

This loan type is for embryonic companies. The criteria vary and, in contrast to other loan types, a company may not even need a minimum turnover to qualify. The Start Up Loans Company, a subsidiary of the British Business Bank, offers such loans. It is specifically designed for businesses struggling to get finance from elsewhere – artists, fashion designers, IT founders and ‘mumpreneurs’ have all benefited from its lending.

» MORE: Compare start up loans

Bridging loans

If you need to make a quick purchase, such as at an auction or during a sale period, then a bridging loan could fill a short-term financial gap until you can get hold of the funds you need or make a longer-term arrangement for doing so.

» MORE: Compare bridging loans deals

Tax loans

A business tax loan helps you to pay the tax that you owe HMRC. The process is simple – specialist underwriters will examine your application and determine the risk factor, before (hopefully) lending you money.

Cash advances

A merchant cash advance, also called a business cash advance, is a lump sum provided to companies based on projected figures, specifically card expenditure – so if you don’t accept credit and debit card payments, you won’t be eligible.

» COMPARE: Cash advances

Asset financing

Asset financing is a type of finance specifically designed for the acquisition and use of equipment, such as vehicles, computers or machinery – a typical example of this is leasing. While a lease won’t give you ownership, it does let you use the latest technology for a predetermined period. A hire purchase will enable you to buy the equipment at the end of the term, and some also allow you to pay extra to include maintenance.

» COMPARE: Asset finance

Invoice financing

Invoice financing is a loan presented as an advance on cash owed from customers, rather than waiting for them to pay. The invoices themselves act as collateral and lenders do not need to provide the full 100% of the invoice amount owed, so this method of financing is quite popular with banks. A good credit score is usually necessary, but once established there can be benefits – some lenders offer this as a free facility if you sign up to an ‘invoice financing contract’, i.e. letting the lender provide invoice financing for a set term.

» COMPARE: Invoice finance

Peer-to-peer finance (P2P)

A particular niche of start up loans is the surge in peer-to-peer lending and borrowing (also known as crowdfunding or crowd sourcing). A borrower can define the type of finance they need (loan, donation, etc) and set the terms, while in effect the lender is investing in a small company and may be able to gain interest at a rate better than banks will offer – although higher interest comes with more risk.

Is alternative business funding worthwhile?

Ultimately, it’s up to you to decide if pursuing alternative business funding is worthwhile for your business – but there are plenty of benefits to be had. Applying for alternative finance could be a quicker, simpler process than the traditional credit card or bank loan route. The products on offer may be more versatile, with more flexible repayment options. And the sheer variety of products available means that if you’re a young business, or if your company’s credit history isn’t perfect, it’s more likely you’ll find a product that suits your needs on the alternative finance market.

» MORE: Expanding your business: what are your funding options?

About the authors:

Caroline Ramsey is a content creator who specialises in personal finance. More than a decade of working in editorial teams, she offers highly tailored content covering a number of topics. Read more

Hannah has been writing about money since 2013. Formerly a copywriter for Virgin Money, covering credit cards, mortgages, pensions, and more, she now writes on personal finance for NerdWallet UK. Read more

Brean is a personal finance writer at NerdWallet. She covers a range of financial topics and has written for consumer titles including Which?, Moneywise and The Motley Fool. Read more

Looking for business finance? Compare business loans now

If you have any feedback on this article please contact us at [email protected]