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The Basics of Alternative and Nonbank Financing

The good news is that despite the dismal credit environment, there are many nonbank and alternative financing options available to companies that need a cash infusion, whether to beef up working capital or help facilitate growth.

The bad news is that business owners often shy away from nonbank or alternative financing because they don’t understand it. Most automatically rely on their banker for financial information, and many bankers (not surprisingly) have only limited experience with options beyond those offered by the bank. To help ease the fear that entrepreneurs often have of alternative financing, here’s a primer on the most common types of nonbank financing.

The message I am trying to convey is simply that “financially challenged” business owners should not be afraid to consider alternative or nonbank financing options. It’s a fairly simple matter to learn what they are, how much they cost, and how they work. Alternative financing is a much better option than facing the challenges of growth or turnaround alone. It is a known fact that the vast majority of business failures are due to a lack of working capital, but it doesn’t have to be that way. With a more complete understanding of these different types of nonbank financing, you’ll be in a better position to decide if they might be the answer to your financing challenges.

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