By: Jennifer Brazer
Jennifer is the author of From Cubicle to Cloud and Founder/CEO of Complete Controller, a pioneering financial services firm that helps entrepreneurs break free of traditional constraints and scale their businesses to new heights.
Fact Checked By: Brittany McMillen
Alternative Financing for Self-Employed and SMEs: Boost Your Business Growth and Success
Traditional financing avenues often feel like a locked door for too many small business owners and self-employed individuals. Denials from traditional banks can leave promising businesses stuck in a holding pattern, unable to take the next big step. The good news? There are smarter, faster, and more flexible ways to secure the funding you need.
With alternative financing, you’re no longer at the mercy of rigid bank policies. For years, I’ve seen businesses thrive because they explored unconventional funding options that prioritize their goals and timelines. I believe in these tools because I’ve experienced firsthand their transformative impact on clients at Complete Controller. Let me guide you through practical solutions that could unlock opportunities for your business.
Why Traditional Financing Falls Short
I’ll be blunt: traditional lenders often cater to the safest bets. Banks want pristine credit scores, lengthy financial histories, and usually require collateral that budding or small-scale businesses simply don’t have.
Take the shocking reality highlighted by research: firms owned by non-Hispanic white individuals are granted bank loans at rates nearly double those of minority-owned firms. That’s 46% for white-owned businesses versus 23% for Black-owned businesses and 34% for Latino-owned businesses. It’s a system that works for some but not for everyone.
But traditional financing isn’t just inequitable—it’s also slow. When an expansion opportunity knocks, waiting weeks or months for approval isn’t always feasible. That’s the problem my team and I aim to solve every day by helping entrepreneurs move beyond the walls of traditional banking.
What Is Alternative Financing?
Think of alternative financing as your business’s customized safety net. It encompasses funding methods that bend to fit your needs, not the other way around. These options were built with flexibility in mind—something I’ve found invaluable for clients navigating cash flow gaps, new opportunities, or even emergencies.
Where banks see risk, alternative financing sees potential. With platforms and tools tailored to modern entrepreneurs, this approach provides solutions ranging from speedy approval processes to financing structures that don’t require collateral.
Types of Alternative Financing
Peer-to-peer lending
Imagine getting funding directly from individuals rather than an institution. Platforms like Lending Club or Prosper connect businesses to investors willing to back them. It’s streamlined, personal, and—best of all—often much faster.
Crowdfunding
With crowdfunding, you’re not just raising money—you’re raising awareness. Platforms like Kickstarter and Indiegogo let businesses tap into their target audience for small contributions. I once helped a client launch a product through crowdfunding; not only did they hit their financial target, but their campaign also became a tool for early customer engagement.
Invoice financing
This is about turning unpaid invoices into immediate working capital. Companies like BlueVine or FundThrough advance you cash based on outstanding invoices, giving you breathing room to keep operations running smoothly. I’ve seen this tool save businesses from shutting their doors during temporary cash flow crunches. I always say, “Just because a client pays late doesn’t mean your bills can wait.”
Microfinance options
For small-scale businesses that banks often ignore, microfinance loans provide smaller amounts at manageable terms. These loans are especially helpful for sole proprietors or entrepreneurs at the very start of their journey.
Short-term loans
Need funds fast? Short-term loans are a powerful option. The approval process typically takes hours, helping you plug that hole in your cash flow before it becomes a crater. Just keep an eye on higher interest rates—debt has to work for you, not against you.
Benefits of Alternative Financing for SMEs
Flexible funding terms
Unlike traditional bank loans, alternative financing arrangements allow you to negotiate terms that match your business’s cash flow and goals. For instance, peer-to-peer lenders might offer a repayment period that adjusts based on your earnings.
Lightning-fast approvals
My clients are often stunned by how quickly alternative funding options move. One of my favorites was Sarah—a café owner in London—who secured £50,000 through Funding Circle in just five days after banks had turned her down. Within a year, her café doubled its revenue. That’s the kind of impact fast funding can have.
No collateral? No problem.
Traditional lenders often block businesses without significant assets, but that’s rarely the case with alternative financing. Whether you’re renting your workspace or bootstrapping your inventory, these financing options don’t demand you mortgage your future to secure capital.
How to Choose the Right Alternative Financing
Step 1: Pinpoint your needs
Are you growing, bridging cash flow gaps, or covering seasonal expenses? Defining your goals will help you find the best solution. For example, invoice financing is perfect for covering unpaid invoices, while crowdfunding works great for launching a new product.
Step 2: Vet your lender
Not every lender is worth your trust. Platforms like Trustpilot and Better Business Bureau can help you weed out the good from the bad. Trust me, doing a little homework will save you a world of trouble later.
Step 3: Compare terms
Interest rates, fees, and repayment conditions vary wildly. To give yourself the best shot at success, review every line of the terms and conditions. As the CEO of Complete Controller, I cannot emphasize enough how critical it is to familiarize yourself with the fine details. Stay vigilant about potential hidden fees.
For more resources on financial accuracy, check out these small business bookkeeping tips.
Avoiding Common Pitfalls in Alternative Financing
Skimming the fine print
Always—always!—review your financing agreement in detail. As a financial services advocate, I’ve seen hidden fees eat into businesses’ cash flow simply because the owner rushed through the approval process.
Lack of financial planning
Any loan, even a small one, calls for a clear repayment strategy. Without it, you’re playing a risky game. If you need advice on planning, read why accurate financial statements are vital.
Overspending
Borrow only what you need, not everything that’s available. Financing is a tool—not an excuse to put your business in unnecessary debt.
Real-World Advice From a Seasoned Entrepreneur
Over my 15+ years as CEO of Complete Controller, I’ve helped countless entrepreneurs navigate the complex world of financing. One truth has remained constant: the solution lies in understanding your options and thinking beyond conventional banking. When starting my business, banks turned me away more than once, forcing me to seek smarter alternatives. I’m grateful for those obstacles because they taught me to trust innovative solutions that prioritize today’s fast-paced needs.
Conclusion
Alternative financing is shaking up the game for self-employed entrepreneurs and SMEs alike. If the traditional path is blocked, consider this your permission to find a better way. Need help sorting through your options? The team and I are here to guide you. Click here to connect with the experts who have helped thousands of businesses thrive.
FAQ
What types of alternative financing exist?
Peer-to-peer lending, crowdfunding, invoice financing, microfinance loans, and short-term loans are among the leading options.
How fast can I get funded?
Many alternative financing sources can secure approval in days—or even hours.
Is collateral required?
Collateral isn’t always a necessity. Crowdfunding and invoice financing, for example, typically don’t require it.
What risks should I consider?
Watch for high interest rates, hidden fees, and short repayment windows. Carefully review contract terms to avoid surprises.
How does crowdfunding go beyond fundraising?
Crowdfunding combines financial support with built-in PR, showcasing your business to a broader audience while raising capital.
Sources
- Federal Reserve Banks. 2020 Report on Employer Firms – Small Business Credit Survey.
- Mach, Traci L., et al. Peer-to-Peer Lending to Small Businesses. Federal Reserve Board.
- Bankrate. How to Get a Small Business Loan When Self-Employed.
- OECD. Alternative Financing Instruments for SMEs and Entrepreneurs.
- Forbes. Alternative Financing Options for Small Businesses.
About Complete Controller® – America’s Bookkeeping Experts Complete Controller is the Nation’s Leader in virtual bookkeeping, providing service to businesses and households alike. Utilizing Complete Controller’s technology, clients gain access to a cloud platform where their QuickBooks™️ file, critical financial documents, and back-office tools are hosted in an efficient SSO environment. Complete Controller’s team of certified US-based accounting professionals provide bookkeeping, record storage, performance reporting, and controller services including training, cash-flow management, budgeting and forecasting, process and controls advisement, and bill-pay. With flat-rate service plans, Complete Controller is the most cost-effective expert accounting solution for business, family-office, trusts, and households of any size or complexity.
