How to fund your business without a bank loan
By Helm, Business Funding Specialists
- Several alternatives to bank loans offer faster approval and more flexible terms
- Merchant cash advances and revenue-based finance tie repayments to your income
- Many alternatives do not require property or personal guarantees
- The best option depends on your revenue type, funding need, and timeline
For decades, a bank loan was the default answer when a business needed funding. But for many UK businesses today, bank loans are slow, restrictive, and difficult to access. Approval rates have dropped, requirements have tightened, and the process can take weeks.
The good news is that a range of alternatives now exist that offer faster access, more flexible terms, and fewer barriers to entry. Here is a look at the most popular options.
Why businesses are looking beyond banks
There are several reasons why traditional bank loans no longer suit every business.
- Lengthy application processes that can take four to eight weeks
- Strict eligibility criteria that exclude newer or smaller businesses
- Requirement for property or significant assets as collateral
- Personal guarantees that put your home and savings at risk
- Fixed monthly repayments that do not flex with your revenue
- High rejection rates, particularly for businesses without perfect credit histories
Merchant cash advance
A merchant cash advance provides a lump sum that you repay through a fixed percentage of your daily card transactions. It is ideal for businesses that process regular card payments and want funding that flexes with their revenue.
Approval is based on your card transaction history rather than your credit score, and funds are typically available within 24 to 48 hours. There is no personal guarantee, no property security, and no fixed monthly repayment commitment.
Revenue-based finance
Revenue-based finance works similarly to a merchant cash advance but uses broader revenue data rather than just card transactions. Repayments are taken as a percentage of your total business income, usually collected through a direct debit from your bank account.
This option suits businesses that receive income through a mix of payment methods including bank transfers, invoices, and direct debits.
Invoice finance
Invoice finance allows you to access cash tied up in unpaid invoices. Instead of waiting 30, 60, or 90 days for customers to pay, a finance provider advances you a percentage of the invoice value (typically 80% to 90%) immediately.
This option is best for B2B businesses that invoice other businesses and experience long payment cycles.
Peer-to-peer lending
Peer-to-peer lending platforms connect businesses with individual investors who fund loans. Rates can be competitive, and the application process is typically faster than a bank. However, you will still face fixed monthly repayments and may need a reasonable credit history.
Comparing your options
Choosing the right alternative depends on your business type, how you receive payments, and how quickly you need the funds.
| Option | Speed | Repayment style | Best for |
|---|---|---|---|
| Merchant cash advance | 24 to 48 hours | % of card sales | Card-heavy businesses |
| Revenue-based finance | 3 to 7 days | % of total revenue | Mixed revenue businesses |
| Invoice finance | 24 to 72 hours | On invoice payment | B2B with long payment terms |
| Peer-to-peer lending | 1 to 2 weeks | Fixed monthly | Established businesses |
| Bank loan | 4 to 8 weeks | Fixed monthly | Asset-rich, established businesses |
How to choose the right option
Start by asking yourself three questions: How quickly do you need the money? How does your business generate revenue? And how much flexibility do you need in repayments?
- If you process regular card payments and want flexible repayments, a merchant cash advance is the strongest option
- If your income comes from multiple sources, revenue-based finance offers broader flexibility
- If you are waiting on large invoices, invoice finance unlocks cash that is already owed to you
- If you have time to wait and strong credit, a bank loan or P2P platform may offer lower costs
Frequently asked questions
Is it harder to get funding without a bank loan?
Not necessarily. Many alternative funding options have simpler applications, faster approvals, and more flexible eligibility criteria than banks. For card-based businesses, a merchant cash advance can be easier to access than a bank loan.
Are alternative funding options more expensive than bank loans?
Alternative options sometimes have higher costs than bank loans, but they offer faster access and greater flexibility. The total cost depends on the product, provider, and your business profile.
Can I use multiple funding sources at the same time?
In some cases, yes. For example, you might use invoice finance alongside a merchant cash advance. However, combining multiple products increases your total repayment obligations, so it is important to assess affordability carefully.
Do alternative lenders check my credit score?
Most will run some form of credit check, but many place more weight on your business revenue and trading history than your personal credit score.