5 Nonbank Lenders for Small Businesses (2023)

5 Nonbank Lenders for Small Businesses (1)

Some small business owners who need financing seek out a conventional bank loan, where they apply for funding through a lengthy process at their local bank. However, entrepreneurs also have the option of using nonbank lenders for short-term loans or cash advances.

Although these alternative lenders typically have higher interest rates and larger or more frequent payments, they also tend to have less strict requirements and more loan term flexibility, making them attractive options for new startups. If your company needs funding and you don’t want to go through the traditional business loan process, here are 10 alternative lenders to consider.

Fundbox: Easiest nonbank lending application

Fundbox is an online lending platform offering short-term lines of credit and loans. Business owners make weekly payments based on term lengths of 12 or 24 weeks for lines of credit and 24 or 52 weeks for short-term loans.

Fundbox doesn’t charge a penalty if you pay off your loan early and there aren’t any origination fees. The application process is more accessible than some alternative lending platforms because applicants connect their accounting software or business checking account. Fundbox uses this information to approve or deny your application within minutes.

Once approved and finalized online, nonbank lenders may transfer funds to the business account as soon as the next business day.

The minimum requirements include:

  • $100,000 in annual revenue.
  • Six months in business.
  • A personal FICO score of 600 or higher.
  • A business checking account.

[Read more: How to Apply for a Small Business Loan for Your Startup]

Fora Financial: Offers early payment discounts

Fora Financial is a direct lender of working capital and provides two products: small business loans and merchant cash advances. Loan terms may extend up to 15 months, whereas the MCA terms and payment amounts vary based on the business’s revenue. Fora Financial stands out from other lenders because it offers early payment discounts.

Business owners must complete a one-page application and upload three months’ worth of credit card statements through the online portal. The approval process takes 24 hours or less, and business owners can receive funds in as little as 72 hours.

Companies can’t have any open bankruptcies to secure funding and must have been in business for at least six months. Additionally, the company needs either $5,000 in credit card sales or $12,000 in gross sales to qualify.

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BlueVine: Best for startups

BlueVine is a financial technology company that provides banking services such as invoice factoring, lines of credit, and the Small Business Association (SBA) Paycheck Protection Program (PPP) loans. Revolving lines of credit terms are for six or 12 months, while PPP and invoice factoring (aka factoring receivables) terms vary.

The applications take five to 10 minutes to complete. Companies can connect their accounting software or business checking account, or they can upload invoices to the online portal. Approvals occur in 24 hours or less.

Business to business (B2B) startups with at least three months in business, a minimum FICO score of 530, and $10,000 in monthly revenue can apply for an invoice factoring loan. Lines of credit require a minimum FICO score of 600, six months in business, and $10,000 in monthly revenue.

SBG Funding: Same day funding is available

SBG Funding is a business financing firm offering three loan products: term loans, lines of credit, and equipment loans. Business owners benefit from same-day funding and no prepayment penalties.

Additionally, SBG Funding offers longer terms than other nonbank lenders:

  • Term loans: six months to five-year terms with biweekly or monthly payments.
  • Lines of credit: six months to 24 months.
  • Equipment loans: one- to 10-year payment terms.

The minimum requirements are $10,000 in monthly revenue, six months in business, and a FICO score of at least 500. The application and approval process takes place online, and business owners must submit three months of bank statements.

Accion: Custom terms and a small business focus

Accion is a nonbank lender and the only nonprofit organization on this list of alternative financial institutions. It specializes in microlending and focuses on small businesses. Accion provides loans through its Opportunity Fund and tailors funding terms to the needs of individual companies.

In addition, there aren’t any prepayment penalties, and Accion offers coaching and access to a support network. The application takes roughly 15 minutes to complete and requires business owners to enter revenue and expenses from their tax returns manually.

The minimum requirements of the business and owner include:

  • Business must be in operation for at least 12 months.
  • Owner must own at least 20% of the company.
  • Business generates at least $50,000 in annual sales.
  • Owner must be 18 years of age or older.

A peer-to-peer (P2P) loan is when a borrower takes a loan from a nonfinancial institution. LendingClub is a P2P lender that offers financing without strict requirements, and it does so faster than a bank issues a loan.

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QuickBooks Capital: No origination fees, prepayment penalties, or hidden charges

QuickBooks Capital is a service that provides small business loans to eligible QuickBooks customers. They offer funding by directly underwriting loans and providing a marketplace for small businesses to match with curated lenders.

When reviewing loan applications, QuickBooks Capital looks at a business’s history, use of QuickBooks, personal and business credit history, and current liabilities. For small businesses to get approved, they need a credit score of 580 or higher and a minimum of $50,000 in revenue over the past year. If approved, the loan is then generated through QuickBooks and not a third party.

For businesses that are searching for curated lenders, the QuickBooks Capital Marketplace is open to all customers who use QuickBooks Online or QuickBooks Desktop. Borrowers are able to see their various options and compare rates, all without their credit scores being affected.

OnDeck: Offers loyalty benefits

OnDeck is a small business loan provider that offers loyalty benefits for those who renew their funding contracts. For businesses to apply, they need to be in business for one full year and have a minimum credit score of 600, an annual gross revenue of $100K, and a business checking account. If a borrower extends their regular contract or takes out a new loan, OnDeck will waive the remaining interest on the existing loan, so long as the borrower has paid down 50% of the balance.

For some qualifying businesses, OnDeck also offers a prepayment benefit that waives the remaining interest on a loan if you pay it off before the end of its term. This benefit does, however, come with a higher interest rate.

[Read more: 3 Things to Do After You're Rejected for a Business Loan]

National Funding: Best for businesses with bad credit

Businesses that have poor, average, or nonexistent credit should consider partnering with National Funding. As a lender, they offer funding options for new applicants with credit scores as low as 475 for applicants who are renewing. They also do not require collateral for businesses that are taking out loans.

National Funding offers small business loans from $5,000 to $500,000, and up to $150,000 for equipment financing and leasing. If a business pays off its loan early, National Funding offers a 6% early payoff discount for equipment financing loans and a 7% early payoff discount for capital customers who pay off their balance within 100 days of signing their contract.

Lending Club: Best peer-to-peer loan

A peer-to-peer (P2P) loan is when a borrower takes a loan from a nonfinancial institution. LendingClub is a P2P lender that offers financing without strict requirements, and it does so faster than a bank issues a loan. Small businesses only need to be around for one year and have a minimum credit score of 580 and a minimum annual revenue of $50,000. LendingClub does, however, require collateral on any loan over $100,000 and has a higher ordinance fee of up to 8.99%.

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Newtek: Nonbank SBA loan

Newtek is a business lending solution that offers SBA loans as a nonbank. In fact, the organization is the only nonbank lender on the SBA’s top 100 list of most active 7(a) lenders. To get an SBA loan, Newtek requires small business owners to prequalify for a term loan, line of credit, or commercial real estate loan. Business owners then discuss with the borrower what their options are and what financing is the best fit for their situation. Newtek offers loans from $1,000 to $10 million for terms as long as 25 years, but only offers loans to applicants that have been in business for a minimum of two years.

Choose the right nonbank lender for your company

Before exploring alternative lenders, you may wish to see if you qualify for small business grant programs. Doing so can improve your cash flow and help grow your business without you having to worry about paying back a loan.

However, if you need new equipment, have slow-paying customers, or want a safety net during seasonal downturns, use our small business funding guide to determine which loan type suits your needs.

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FAQs

Who are the largest lenders to small business? ›

Digital Lenders Ranked by our FAB* score (updated 29 July 2022)
RankCompanyFAB Score
AdNational Funding****
1Capchase481
2Kabbage (AmEx)428
3Clearco364
30 more rows

What are nonbank lenders? ›

A nonbank lender, or “nonbank bank,” is a financial institution that lends money but doesn't operate with a full banking license. It does not offer deposit, checking, or savings services.

What are some examples of nonbank credit options? ›

NBFIs are a source of consumer credit (along with licensed banks). Examples of nonbank financial institutions include insurance firms, venture capitalists, currency exchanges, some microloan organizations, and pawn shops.

What is the easiest SBA loan to get? ›

SBA microloans are one of the easiest SBA loans to get. SBA microloans are issued by nonprofit community lenders, who set their own rates and eligibility requirements (with some guidance from the SBA).

Which bank give business loan easily? ›

1) HDFC Bank Business Loan

It is one of the best banks in India; they provide business loans for up to Rs. 40 lakhs without any collateral, guarantor, or need of security. They have an easy and quick approval method, plus they also provide attractive offers for its customer.

What credit score does SBA use? ›

Instead of a personal credit score, the SBA uses the FICO Small Business Scoring Service (SBSS) when evaluating 7(a) loan applicants. The system calculates the business owner's credit bureau data, financials and other factors to produce a number between 0 and 300.

What is the difference between bank and nonbank financial institution? ›

Banks are the government authorized financial intermediary that aims at providing banking services to the general people. Whereas NBFCs provides banking services to people without carrying a bank license.

Are non bank lenders risky? ›

However, non-banks are just as safe as traditional banks. Since they cannot take on any deposits, you are not actually depositing any of your money with them. You are just repaying them for the loans and mortgages you are approved for.

How do non-banks lend money? ›

Nonbanks can engage in typical bank-related services like credit card operations and various lending services, such as mortgage lending. These lenders provide users with easier access to obtaining loans — especially for consumers who may not have the best credit or meet certain requirements.

What are the types of thrift banks? ›

The types are savings, private development, stock savings, and loan associations.

What is an alternative lender? ›

Alternative lenders, or nontraditional lenders, are private companies that operate like banks by providing loans to businesses. The difference is that where traditional banks bog applicants down with strict requirements and long applications, alternative lenders provide loans quickly and with far greater ease.

Which of the following is an example of nondepository financial institutions? ›

These nondepository financial institutions include insurance companies, pension funds, brokerage firms, and finance companies.

Can I get a business loan with my EIN number? ›

Can I Get a Loan with Just My Business EIN? Yes, there are certain circumstances where a lender will not use your personal credit score, but only your EIN as a factor in lending to you. Note that they won't just use your EIN in isolation, as there are many factors that go into qualifying for a small business loan.

How much collateral is needed for a SBA loan? ›

For SBA loans under $25,000, the SBA does not require lenders to secure collateral. But personal guarantees are still a must from anyone who owns at least 20% of a company. On the other end of the spectrum, SBA loans over $350,000 require full collateralization—equal to the full loan amount your business is borrowing.

What are the easiest loans to get approved for? ›

The easiest loans to get approved for would probably be payday loans, car title loans, pawnshop loans, and personal installment loans. These are all short-term cash solutions for bad credit borrowers in need. Many of these options are designed to help borrowers who need fast cash in times of need.

Which bank is best for startup loan? ›

The best bank for loans to startup businesses are:

HDFC Bank Business Loans. Citi Bank Business Loans. ICICI Bank Business Loans. Axis Bank Business Loans.

How do I approach a bank for a Business Loan? ›

Some of the things you should keep in mind when applying for a business loan are:
  1. Make sure you improve your credit score.
  2. Choose wisely the lender from whom you wish to avail the business loan.
  3. Do not apply for multiple loans. ...
  4. Apply for a loan amount which you know you can repay on time.

How do you get a bank loan for a new business? ›

Steps to apply for a Small Business Loan
  1. If the financial lender has the online application facility, visit the website.
  2. Under the loans section, choose business loans or small business loans.
  3. Download the application form and fill in the required details.
  4. Submit the application form.

Can I get a SBA loan with a 570 credit score? ›

The Small Business Association (SBA) does not specify a minimum credit score required to secure an SBA loan. However, SBA loans are provided by lenders who may have minimum score requirements. Typically, this minimum is 620 to 640. However, the higher your score, the more likely you are to receive approval.

How do I qualify for a small business loan? ›

How to Qualify for a Small-Business Loan in India
  1. Check the eligibility criteria. Understanding the requirements set by the lender is essential before applying for small business finance. ...
  2. Pay attention to your credit history. ...
  3. Develop a strong business plan. ...
  4. Gather all the necessary documents. ...
  5. Apply for a loan online.
29 Jul 2021

Are SBA loans easy to get? ›

Considered a Startup

Owning a brand-new business is one of the top reasons it's difficult to get an SBA loan. Traditional lenders view funding startup businesses as “risky.” They usually require the business to be at least two years old before they'll consider an approval.

Which financial institution provides the best benefit to a loan applicant? ›

Banks remain as one of the main financiers because of its established financial reputation. They offer adaptable loan terms and payment methods – an option beneficial to borrowers, especially if they don't miss their repayment plan.

Is it good to take loan from NBFC? ›

Advantages of Taking Home Loan from NBFC

The advantages are: Relaxation In Terms of Credit Score: NBFCs give some relaxation when it comes to credit scores. Unlike banks, NBFCs offer a home loan even if your credit score is below 700.

What are the 9 major types of financial institutions? ›

  • Central Banks.
  • Retail and Commercial Banks.
  • Internet Banks.
  • Credit Unions.
  • Savings and Loan (S&L) Associations.
  • Investment Banks.
  • Brokerage Firms.
  • Insurance Companies.

What are the disadvantages of non-bank loan application? ›

Disadvantages of Non-Bank Lending

Non-bank lenders experience higher credit losses than a traditional bank; therefore, they charge higher cash-on-cash interest rates and may include payment in kind (PIK) interest to further enhance total returns.

Are non-bank lenders regulated? ›

CFPB is authorized to write rules to ensure that non-banks are legitimate entities and able to perform their obligations to consumers. Such rules may include background checks for principals, officers, directors, or key personnel and bonding or other appropriate financial requirements.

Who lends money other than banks? ›

Overview of the best peer-to-peer lending sites for borrowers and investors
LenderBest forAPR
PayoffPaying off credit card debt5.99% to 24.99%
LendingClubThose with average credit scores5.98% to 35.89%
PeerformInterest rates5.99% to 29.99%
UpstartYoung people7.98% to 35.99%
4 more rows
1 Jun 2022

What is digital lending? ›

Digital lending involves giving and recovering loans through web platforms or mobile apps. It facilitates speedy disbursal and helps lower costs. Lending Service Providers (LSPs) operate in collaboration with Non-Banking Financial Companies (NBFCs) who disburse credit to customers using the former's platform.

What is nonbank deposit? ›

A non-banking institution which is a company and has principal business of receiving deposits under any scheme or arrangement in one lump sum or in installments by way of contributions or in any other manner, is also a non-banking financial company (Residuary non-banking company).

Which financial institutions can issue loans but Cannot accept deposits? ›

NBFCs are often called shadow banks as they function a lot like banks but with fewer regulatory controls. Barring a few, they cannot accept deposits from people and so raise money from bonds or borrow from banks.

What is a qualified thrift lender? ›

Qualified Thrift Lender. Assets that are includable as QTI without limit: • Loans to purchase, refinance, construct, improve, or repair domestic residential or. manufactured housing.

What are the 4 types of banks? ›

What are some different types of banks?
  • Retail banks. Retail banks, also known as consumer banks, are commercial banks that offer consumer and personal banking services to the general public. ...
  • Commercial banks. ...
  • Community development banks. ...
  • Investment banks. ...
  • Online and neobanks. ...
  • Credit unions. ...
  • Savings and loan associations.
12 Oct 2021

Do thrift banks still exist? ›

Originally, thrifts only offered savings accounts and time deposits, but over the past 20 years, the banks' scope of services has expanded to meet the needs of the average consumer. They now offer the same products as credit unions and commercial banks.

What is the most popular alternative loan? ›

This being said, short-term loans are most common in alternative lending—meaning term loans with a repayment period of one year or less.

Are private lenders better than banks? ›

Private lenders take a more customizable and tailored approach to lending. For example, a private lender might be able to overlook flaws from your past that appear in your credit history and consider factors much more current, such as your debt-to-income ratio.

Why dont banks lend to small businesses? ›

In the wake of the recession, increased federal regulations have resulted in banks being more conservative about the amount of risk in their investment portfolio. Small businesses inherently represent more risk than large corporations, making banks hesitant to lend to them.

What are the 3 non-depository institutions? ›

The non-depository institutions include insurance companies, pension funds, finance companies and mutual funds.

What are the four types of non-depository financial institutions? ›

Nondepository institutions include insurance companies, pension funds, securities firms, government-sponsored enterprises, and finance companies.

What bank is a non-depository institution? ›

Finance companies are nondeposit institutions because they don't accept deposits from individuals or provide traditional banking services, such as checking accounts. They do, however, make loans to individuals and businesses, using funds acquired by selling securities or borrowed from commercial banks.

Who lends the most mortgage 2021 UK? ›

In 2021, mortgage lending by the 15 largest lenders in the United Kingdom (UK) amounted to almost 280 billion British pounds. Lloyds banking group topped the list for mortgage lending in the UK with approximately 56 billion British pounds in gross lending.

Who is the biggest mortgage lender in the UK? ›

Largest mortgage lenders in the United Kingdom (UK) in 2021, by market share
CharacteristicMarket share of gross lending
Nationwide BS11.49%
Santander UK10.77%
Barclays10.71%
HSBC Bank8.86%
7 more rows
8 Sept 2022

What is the average interest rate on a business loan UK? ›

An annual interest of between 3% and 10% per annum might be typical for an unsecured loan. As a business asset has been provided as collateral for the loan, the interest rate might be slightly lower than for an unsecured loan. A commercial mortgage interest rate might be between 2% and 7%.

How many mortgage lenders are there in the UK? ›

There are currently over 200 significant separate financial organizations supplying mortgage loans to house buyers in Britain, with Lloyds Bank and the Nationwide Building Society having the largest market share.

Can I get a mortgage 5 times my salary? ›

Can you get a mortgage based on 5 times your salary? Yes, it's possible. Although the standard multiple income preferred by most lenders is below this, with the average you can borrow standing at 4-4.5 times your annual income.

Can you get a mortgage 6 times your salary? ›

While it's uncommon, yes, it is possible. It's more difficult to get a mortgage using a 6 times income multiple as providers view the loan as higher risk.

How many times my salary can I borrow for a mortgage UK? ›

How many times my salary can I borrow for a mortgage? Lenders will typically use an income multiple of 4-4.5 times salary per person. For example, if you earn £30,000 a year, you may be able to borrow anywhere between £120,000 and £135,000. However, lenders will sometimes offer a mortgage that is 5 times your salary.

Do mortgage lenders look at bank statements UK? ›

Mortgage lenders need you to provide them with bank statements so that they can verify your income and affordability, check for any risk factors and see your deposit funds.

What is the largest mortgage you can get? ›

For 2022, the Federal Housing Finance Agency raised the maximum conforming loan limit for a single-family property from $548,250 (in 2021) to $647,200. In certain high-cost areas, the ceiling for conforming mortgage limits is 150% of that limit, or $970,800 for 2022.

How do I get the highest mortgage rate? ›

If you need more borrowing power, these eight strategies could help.
  1. Show more income. ...
  2. Pay off other debt. ...
  3. Raise your credit score. ...
  4. Put at least 20 percent down. ...
  5. Apply for a 7/1 ARM, FHA or VA loan. ...
  6. Add a co-borrower. ...
  7. Build cash reserves. ...
  8. Get more than one quote.
21 Jun 2021

What is the best place to get a business loan? ›

The 6 Best Small Business Loans of 2022
  • Best Overall: Kabbage.
  • Best Revolving Line of Credit: Fundbox.
  • Best for Microloans: Kiva.
  • Best for SBA Loans: Fundera.
  • Best for Same-Day Funding: OnDeck.
  • Best Lender Comparison Site: Lendio.

What do I need to get a business loan? ›

Credit scores, annual revenue, business plan and collateral are the four cornerstones of most business loan applications. But note that there are many other supporting documents you'll need to qualify for a business loan. They can include: your driver's license.

What is a normal rate for a business loan? ›

Average Interest Rates by Business Loan Type
Type of loanInterest rate
Bank loan2% to 13%
SBA loan3.75% to 10.25%
Online business lender7% to 100%
Invoice factoring13% to 60%
2 more rows
12 Oct 2021

Who is the biggest lender? ›

The 10 biggest lenders
  • Rocket Mortgage. The biggest by a large margin, Rocket originated more than 1.2 million loans worth $340 billion in 2021, according to HMDA data. ...
  • United Shore Financial. ...
  • LoanDepot. ...
  • Wells Fargo. ...
  • Freedom Mortgage. ...
  • JPMorgan Chase. ...
  • Fairway Independent Mortgage. ...
  • Caliber Home Loans.
5 Apr 2022

What is the average mortgage in the UK? ›

Average Mortgage Debt in the UK

The average UK mortgage debt in 2021 was £137,934. There has been a dramatic drop in mortgage approvals in 2022 (almost 87%) which has been mainly due to the COVID-19 pandemic. The average price in March 2021 was £231,855.

What is the current mortgage rate UK? ›

Current rates:

The Bank of England Base Rate is 2.25%. The Standard Variable Mortgage Rate is 3.75%. The Homeowner Variable Rate is 5.24%.

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