4 places to go when the banks say no

After the hit on Wall Street, credit standards will be even tighter. Before putting the brakes on your future purchases or projects, consider these non-traditional funding options.

Private lenders and credit unions. Unlike banks, these lenders rely less on your credit score and more on your business model or history. Credit unions’ lending has grown rapidly of the last few years — up 18.6% since 2006. Business owners must be a member of a credit union to apply for a loan.

Private lenders use a company’s performance as the main factor in lending. After providing the loan (around $30,000 is the average amount), private lenders will debit a small amount from the company. The loan’s duration is usually one year, and interest rates can be pricey — from 18-36%.

Microlenders. These lenders provide small loans ($5,000-$25,000) to those who can’t find funding elsehwhere. Usually non-profits, microlenders rely on charities for donations. While these loans have slightly higher interest rates than banks, they’re subsidized by various federal, state and local grants.

You can search for microlender on the Association for Enterprise Opportunity’s database.

Merchant cash advances/factoring. A factoring company gives out a cash advance to an entrepreneur or merchant, who repays the advance by routing part of their future credit-card sales back to the factoring company.

While advances are far more expensive than other funding (short-term loans can have double- even triple-digit interest rates), a factoring company isn’t considered a creditor if the business fails. Another plus: Borrowers get money with far less paperwork and/or collateral than a bank requires.