3 Types Of Alternative Funding Options For Small Merchants To Bypass Traditional Banks

Traditional Bank
Traditional Bank

Running your own company can be quite a challenge, especially if you run a startup without sound financial backing. Small companies often struggle to run operations due to the constant strain of cash flow they experience, due to which they have trouble expanding or growing the scale of their operations.

The obvious solution to the problem of financial constraints is to get temporary cash injections or loans from financial institutions. However, the application and vetting process for traditional banks is so long that small business owners completely lose hope when it comes to getting financing through them. 

Neither do small businesses have the credit rating that banks require, nor do they have the collateral to show for it. Hence, small businesses should look for alternative funding and lending options such as merchant business funding at APICKLE that bypass traditional banks, and given below are three such options:

1. Unsecured loans

Traditional banks rely on collateral and high credit scores to approve loans, which are essentially known as secured loans as they have collateral backing them. If the borrower defaults on their loan payments, the bank can simply file a motion to liquidate their pledged collateral and hence get their money back.

However, small businesses do not usually have collateral to offer, and hence should opt for unsecured loans instead. These loans do not require collateral, however, they have a higher interest rate in comparison to secured loans due to the risk involved. Many funding websites and institutions offer unsecured loans.

2. Merchant cash advances

Small businesses, especially retailers, may often suffer from their daily payment liabilities. Buying new stock, paying suppliers, and giving employees wages are some of the tasks that small businesses may struggle with. This certainly holds when businesses have previous stock unsold that is seasonal and need new stock for their customers

Merchant cash advances are particularly helpful in retail environments, in which the financial institution offers cash advances to merchants to purchase stock or fulfill other obligations. In return, the lender gets the right to a certain percentage of each credit or debit card sale until the advance is paid for.

3. Microloans

Small businesses regularly require cash injections for running their daily operations. While securing traditional loans from a bank may not be an option for small businesses, they can benefit from the option to avail of Microloans. Microloans are essentially when a lender agrees to give the borrower a small sum of money without the need for collateral or credit score. 

The key, however, is that with micro loans the lender can limit or restrict where the borrowed money can be spent. These areas typically include organization costs, the cost of buying equipment, and buying new technology. Multiple financial companies and non-profit organizations offer microloans. 


The above-mentioned alternate options for financing are beneficial for small businesses that have had no luck securing funding from traditional banks. To grow their business and increase the scale of their operations, small businesses should make use of these funding options.

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