5 Alternative Financing Options for Your Business
When your small business needs capital but a traditional bank loan isn’t the best fit, it’s time to get creative. There are several alternative financing options that cater specifically to small businesses and are less restricted by the regulations and five Cs of credit (character, capacity, capital, collateral, and conditions) that banks must adhere to. Our Washington Trust Commercial Banking team can help you access the alternative financing options you need to start, run, or grow your business.
The Small Business Administration (SBA) provides various loan programs applied for through member banks, such as the 7(a) loan program, which offers loans up to $5 million to help you start, acquire, or expand your businesses. SBA loans have lower down payment requirements, longer repayment terms, and competitive interest rates compared to traditional loans. Additionally, the SBA offers a guarantee through the Express Loan Program that can be used for smaller loan requests. Both loans are partially guaranteed by the SBA, making them more accessible to small business owners who may not qualify for traditional bank loans.
Farm Credit Loans
Farm Credit loans are specifically designed to meet the needs of farmers, ranchers, and agricultural businesses, for use in purchasing land, equipment, livestock, or refinancing existing debts. Farm Credit institutions are member-owned cooperative lenders that offer flexible loan terms and competitive interest rates.
504 Loan Program
The 504 Loan Program, administered by the SBA, provides long-term, fixed rate financing for major owner-occupied fixed assets (such as land, buildings, and equipment) that promote business growth and job creation. The 504 loan packages are partnered with Certified Development Companies (CDCs), SBA's community-based partners that promote economic development within their communities. 504 loans are attractive because they require a low down payment (typically 10 percent) and offer below-market interest rates fixed for the life of the loan (up to 25 years).
State-based Economic Development Loans
Many states, including Rhode Island, Connecticut, and Massachusetts, have economic development agencies and Small Business Development Centers that offer loans and other financial incentives to promote local business growth. These loans may come with favorable interest rates, flexible repayment terms, and reduced collateral requirements.
Business Development Companies (BDCs)
Business Development Companies (BDCs) are for-profit investment companies that focus on investing in and lending to small and medium-sized businesses. They offer a range of financing options, including debt and equity investments, making them flexible sources of capital, and mezzanine financing, with repayment terms adapted to your company’s cash flows. BDCs often work closely with entrepreneurs, providing mentorship, strategic guidance, and access to their network of resources.
Washington Trust Can Help
When your business needs capital, your Washington Trust Commercial Banking team is ready and eager to work with you. Whether it’s through a traditional bank loan or an alternative financing option, we are here to guide and advise, working with our financing partners to help you identify and access optimal financing for your needs. As an SBA Preferred Lender and one of the top SBA lenders in Rhode Island, we are uniquely positioned to access SBA loans quickly and seamlessly. When it comes to accessing capital to start, operate, or grow your business, talking with us is your first step.
Contact a Trusted Advisor
For more information or to speak with one of our trusted advisors about your unique financial needs, contact us at 800-465-2265 or submit an online form.