5 Places to Get Alternative Loans for Your Business with an Average Credit Score

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5 Places to Get Alternative Loans for Your Business with an Average Credit Score. Alternative loans provide financing for businesses that do not qualify for traditional loans. These lenders have are usually based online and have much simpler eligibility criteria. The main advantage of these alternative business loans lies in the fact that you qualify even if you have an average credit score. You might ask what an average credit score is for a business. A credit score that falls under the ranges of 580-669 is considered as an average score. This average score is the cause of rejection for many businesses seeking traditional loans. 

However, the good news is that alternative loans are still available even if you have a bad credit history. These come in several forms such as merchant cash advances, equipment financing or invoice factoring. What is important is that you find the right one for your business.  

In this article, we have put together a list of 5 places to get alternative business loans, if you have an average credit score. Note that each of these options has its own sets of pros and cons and you should choose one that best suits your needs. 

Short or Medium Term Alternative Loans 

Short-term alternative loans from online lenders are structured more or less like a traditional loan. However, the requirements to qualify are far less strict. Although a plan of 3 years is usually set for the repayment, you can also look out for shorter-term loans covering 3-6 months period. The application process is quick and takes up to 3-4 business days. 

Medium terms loans give you a longer-term period that spans to 1-5 years with better rates and loan limits. However, the qualification criterion for this loan is more competitive. Lenders usually hand out these loans to businesses that are well established. 

Merchant Cash Advance

While most loans generally take factors like credit score or revenue into account, this alternative financing option focuses on cash flow. Under a merchant cash advance, the business is granted an advance in return for a share of its future credit sales, which it then pays off as a specific percentage from its sales. 

To qualify, the business has to present detailed reports of its credit sales only. The benefit here is that even a new or a struggling business can qualify, despite having no good credit history. In addition, the amount that needs to be repaid depends wholly on the sales made. The funding amount is 50% to 200% of the monthly credit sales volume. The revenue requirement varies from lender to lender but must at least be equal to $3,000 monthly.

Equipment Financing

If you plan to get a loan that meets your need to purchase new equipment, you may consider applying for equipment financing. Under this option, the equipment you finance serves as the collateral for your loan. In case you default, the lending company seizes the equipment to recover the losses. However, other assets of the business, as well as the owner’s personal assets, remain safe. 

When it comes to equipment financing, the lender is more concerned with the value of the equipment, rather than your credit score. The loan limit is up to $1million and there is usually a 5% to 10% down payment on equipment.

Online Inventory Financing

Online inventory financing is given either as a short term loan or line of credit basis. Like equipment financing where the business gets finance to purchase equipment which then acts as collateral on the loan, inventory financing is given to help the business purchase the inventory it needs. The benefit here is that the loan amount usually gets disbursed within weeks rather than months. This loan also tends to have a lower interest rate as compared to other similar loan types. 

For seasonal upswings or stock replenishments that require quick cash, this loan type serves as a quick way of securing funding. The loan limit is between $50,000 to $500,000.

Revenue Based Financing

Also termed as a royalty based financing solution, RBF is an alternative loan type that takes a percentage of the business’s revenue as payment instead of a predefined amount. It serves as an exchange of future capital for present growth. RBF process has customization based on each business, as there is no standard model for this type. The funding takes a while to mature but the rates remain agreeable. The minimum revenue required for a month is $10K and the funding amount is equal to 1 to 3 times the value of monthly revenue. The business is also required to be operating for a minimum of 1-2 years. 


The above shown alternative business loan types are just some of the most common ones. There are several other options available such as invoice financing, business lines of credit or P2P financing. Each type has its own advantages and disadvantages based on your business situation. Before considering any option, it is a good idea to do your research on which option will suit you best. Do not rush into an idea just for the sake of quick cash, as it can prove to be harmful in the end.