When you’re starting a business, the need for start-up capital is endless. The good news is there’s lots of options on the market, whether you’re a new business owner or you have bad credit, you have lots of options at your disposal to find what works best for your business. Two common forms of acquiring capital is through a SBA loan or an alternative funder. But what does that mean and what’s the difference?

SBA Loan

An SBA loan is a small business loan issued by the U.S government. The benefits of these loans are they usually have lower interest rates than conventional banks and the repayment plans are more flexible than going through a bank. However, since the application process is lengthy, it can be time consuming. You need to ensure you have lots of documentation, net worth, business projections, any information about debts or previous loans, etc. Since it’s a government funded loan, it requires lots of documentation and you can expect to take awhile to process.

Alternative Funder

If you don’t have time to go through the process of an SBA loan or you cannot qualify and you cannot qualify for a loan from a conventional bank, your next option would be an alternative funder. All this means is it’s a loan outside of standard financial institutions. It could be through a non-profit or a private investor. Again, there’s lots of various ways to gain access to a business loan, it will just depend on you and your business needs.

An alternative funder would be much easier than acquiring an SBA loan, with less paperwork and a seamless process. Usually the interest rates attached to alternative funding agreements tend to be higher than conventional financial institutions. But if you need capital in a short time frame, this could be your best solution.

Which Option is Best?

Both are great options if you’re a small business owner looking for a loan. However, it depends how urgently you need capital to grow. If your business is slowly growing and you do not urgently need capital, an SBA loan would be your better option since the rates are better and repayment would be more flexible. But if you need capital to grow or you wish to accelerate your business growth, we would recommend an alternative funder versus resorting to a SBA loan. Plus, you’ll have more options if you look at alternative loaner options versus an SBA loan.