The tightening of traditional bank-based credit has led to a wide range of new loan products that fit various niches within the business community. While there are drawbacks to traditional financing becoming more difficult to attain, there are also a variety of benefits like better access to credit solutions that are not necessarily dependent on a company’s credit score. Even if your credit score is great, these small business loans provide faster turnaround times and a much higher approval rate than bank loans, so they have a wide range of applications.

Revenue-Based Loans

The underwriting on these loans is supported by your actual revenue over a period of time, not by your credit score alone. While credit scores are still used to calibrate the length of the loan and the total size, they are typically accessible to any company that does not have NSFs or negative balance days on their record. These tend to be fee-based, though, so the repayment amount does not always go down if you are able to pay early. That being said, knowing your total cost up-front can be its own advantage, and for specific projects that will generate a high return on investment, this is a very useful strategy.

Accounts Receivable Financing (Factoring)

These small business loans are based on your incoming receivables, and calculated from existing invoices. The way that they work is pretty simple. Your lender will go over the invoices and assess each customer’s track record. Then, they will make a percentage of the invoice value available to you right away, and they will collect from the customer on your behalf. After collection, the factor sends you the additional balance of the payment, less whatever fees they charge. This option can be great for companies that need to extend credit to their customers, because it allows you to use a portion of the funds that you have yet to collect, but it does require you to have a strong customer base with a good payment record, because the loan is basically made based on your customers’ credit.

Asset-Based Loans

These loans are based in the value of assets your business owns, so it is fairly easy to qualify for them if you have valuable equipment, properties, or other tangible items to put up as collateral. Like revenue-based loans, the interest rates and repayment terms can fluctuate according to your credit score, but typically the score is not a make-or-break consideration for these small business loans. Access to financing in this form is a good reason to buy assets outright if you have the capital to invest in it, by providing the company with a source of income that can also be leveraged if necessary.

Whichever way you go, there are a variety of options out there that do not use your company’s credit score as the primary consideration in underwriting a loan. Finding the one that fits your needs today is the next step.