Alternative business funding is any finance for your company that doesn't come from a high street bank: a loan from a non-bank lender, money advanced against your unpaid invoices, your equipment, or your card takings, or investment from people who want a share of the business. Most of it is quicker to arrange than a bank loan and asks for less paperwork, which is why most directors arrive here after a bank has said no, or is still deciding while a supplier waits to be paid. One thing is worth knowing before you sign anything: lending to a limited company sits outside most of the Financial Conduct Authority's rules, so the lender deserves as much attention as the deal.

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What is alternative business funding?

It's funding that doesn't come from a mainstream provider, which in practice means a bank. That covers lenders who make a decision from your bank data instead of a branch meeting, platforms that put you in front of investors, and funders who lend against something you own or something you're owed.

What they have in common is that they ask less of you up front. The long application, the file of documents, the two years of filed accounts and the strict qualification terms are where most bank applications stall, and most alternative funders have built their process around at least one of them.

That makes these routes most useful to the companies a bank finds hardest to price: young ones, ones whose revenue moves with the season, ones with no property to offer as security, and ones that need an answer this week rather than next month. It isn't a lower bar, though – a funder that moves quickly has usually automated the reading of your accounts, not stopped minding what they say.

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Debt or equity: what you give up either way

Every route on this page is a version of one of two choices. You borrow the money and repay it, or you sell a share of the business and don't.

Debt means repayments on dates you've agreed, whatever that month turns out to look like, and you keep every share and every decision. Equity finance means giving away part of your future profits and some say over how the company is run, and it's permanent in a way a loan isn't.

Which one you need comes down to the shape of the problem. If money is going out before money comes in and you can name the day it comes back, that's a timing problem, and debt is almost always the answer – you wouldn't sell part of the company to bridge six weeks. If you need capital you couldn't service out of today's revenue, equity is worth the conversation.

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Most small business lending now happens outside the high street

This isn't a prediction. Challenger and specialist banks wrote 60% of gross small business bank lending in 2025, up from 39% in 2012, and once non-bank lenders are counted too, 68% of all small business lending came from outside the big five banks, according to the British Business Bank.

Brokers saw it first, because they place the applications. In our research published in August 2025, 61% of brokers said they send most of their loan applications to alternative lenders, and 71% said mainstream banks are pulling back from small business lending. The reason they gave was speed: 73% named decision speed as the main driver, up from 63% three months earlier.

Access on its own isn't the point, though. Our research with Capital Economics looked at current-account data from thousands of our customers and found that taking a loan is associated with revenues nearly a fifth (19%) higher within a year than if no finance had been taken. That's an association rather than a promise, and it counts for most in the companies held back by timing rather than by demand – a full order book and an empty account is a fixable problem.

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Main types of alternative business funding in the UK

Each of these closes a different kind of gap, so the useful question isn't which is best but which gap you have.

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Business loans from non-bank lenders

This is the closest thing to what you were expecting from the bank: an agreed amount, a fixed term, and monthly repayments, usually with no security taken over property. It fits a gap you can put a date on – a tax bill due before your customers pay, stock before a peak, payroll before a big invoice lands – which is what people usually mean by a working capital or cash flow loan.

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Invoice finance

Invoice finance advances most of the value of an unpaid business-to-business invoice, then pays you the rest, less fees, once your customer settles. With factoring the funder usually runs credit control and your customer knows about it; with discounting it's normally confidential. It suits a company whose cash is reliably tied up in a ledger rather than one with a one-off gap.

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Asset finance

Asset finance spreads the cost of a vehicle, a machine, or a system over its working life, with the asset itself as the security. Hire purchase, finance leases, and contract hire differ mainly in who owns it at the end. Because the lender can recover what it funded, it's usually the cheaper way to buy equipment, but it's built for something that earns rather than for a gap in cash flow.

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Merchant cash advances

A merchant cash advance gives you a lump sum and takes an agreed percentage of your card or online sales until a fixed total fee is cleared. Repayments fall when takings fall, which is genuinely useful in a seasonal retailer or a hospitality business. The thing to look at is that fixed fee: it's agreed up front, so it doesn't shrink if trade is strong and you clear the balance early.

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Peer-to-peer lending

Peer-to-peer lending platforms match people and institutions who want to lend with businesses that want to borrow. Folk2Folk, Funding Circle, and LendingCrowd are three UK examples. You still pass credit checks and you still owe the money on agreed dates, so treat it as a loan from a different source rather than an easier one.

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Crowdfunding, business angels and venture capital

Crowdfunding means pitching to many small investors at once. Business angels and venture capital funds mean pitching to a few, who may bring experience and contacts as well as money. All of them take months, most mean giving up equity, and all need a plan that stands up to questions. Reward and donation platforms exist too, but they fund a product launch rather than a trading company's gap.

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Grants, trade credit and money closer to home

Not every route is a loan. Small business grants don't have to be paid back, which is why they're competitive, open only in set windows, and usually restricted by region or sector; many are government-backed. Trade credit isn't funding in the usual sense at all – it's a supplier agreeing to wait, which closes the same gap for nothing if you can negotiate it. Money from family or friends belongs on the list too, with one condition: write the terms down as you would with any lender.

If your company hasn't started trading yet, almost none of this is open to you: the realistic routes are equity and a personal start-up loan to a director, which is a different kind of borrowing from everything on this page.

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What each option costs, how fast it is and who qualifies

Price is the first thing everyone compares and the hardest, because each of these is quoted differently and the number you're offered depends on your company. What you can weigh up before you apply is the shape of the deal: how the cost is charged, how long the money takes to arrive, and what a funder wants to see. Speed below runs from application to money in the account, once any facility is in place.

The charging method is the column worth slowing down for, because it decides what repaying early is worth to you. On an advance with a fixed total fee, clearing the balance in three weeks costs what it would have cost over nine months. On a facility charging interest on the balance it doesn't, because you've held the money for fewer days. If you expect the cash back sooner than the term, that difference is most of the decision.

And the trade-off, plainly: speed and flexibility usually cost more than a bank. A high street term loan, if you qualify for one and can wait for it, will normally be the cheapest money in this list. What you're paying for everywhere else is a decision you can act on, a repayment shape that matches your cash flow, or access you wouldn't otherwise have. If none of those three is what you're short of, the bank is worth one more conversation.

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Most lending to a limited company isn't regulated

Almost every guide on this subject says the opposite, so it's worth being exact. The Financial Conduct Authority's position is that lending to limited companies is outside its remit, as is any business lending over £25,000, whoever is borrowing. Its rules bite where the borrower is not a limited company and is borrowing £25,000 or less, which the regulator itself calls the very limited part of the small business lending market it regulates. Commercial lending appears on its published list of things it doesn't regulate or supervise.

What that means in practice is that the agreement is your protection. The consumer credit rules you may have met in your own name – the cooling-off period, the prescribed way costs have to be set out, the rules on what happens if you fall behind – don't apply to your company's loan. The terms you sign do, which is why they're worth reading properly in a way a personal agreement sometimes isn't.

It doesn't mean you're on your own if something goes wrong. Complain to the lender first and give it the chance to put things right. If the answer doesn't satisfy you, the Financial Ombudsman Service may still be able to look at it: it says about 99% of UK small businesses are eligible to bring a complaint, and the FCA's position is that the Ombudsman can consider complaints about some activities the FCA itself doesn't regulate, lending to companies included. Two limits, though. You have six months from the lender's final response, and missing it usually ends the matter. And it depends on the firm: if it holds no FCA authorisation or permission at all, the FCA says you won't have access to the Ombudsman.

Where regulation does sit in this market, it tends to be on the platform rather than on the lending. The FCA authorises peer-to-peer lending and investment-based crowdfunding platforms, while reward and donation crowdfunding sits outside its rules, even where it regulates the payments running through them.

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What to check before you sign with any lender

None of this takes long, and it's the same four checks whoever you're borrowing from:

• Look the firm up on the FCA's Financial Services Register and read what it is authorised or registered to do. 'No longer authorised' or 'Revoked' is a reason to stop.
• Check the contact details you've been given against the ones on the register, because cloned firms copy real ones.
• Read the early settlement terms and the default terms before the headline rate. On an unregulated agreement, those are the clauses that bite.
• Ask who to complain to, and check the lender publishes the process, before you sign rather than after.

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How to choose the right funding option for your business

Most of the questions worth asking collapse into two dates: the day the money has to leave your account, and the day it comes back. Write the gap down in pounds with both dates against it, and most of the options above rule themselves out without any help.

What's left is a question about shape. If the money comes back on a day you can name, a fixed term with monthly repayments fits. If it comes back with trade rather than on a date, a share of sales fits. Only then compare prices, across the whole cost of the facility rather than the headline rate.

Ask what happens if that second date slips, because it often does: what a reduced or missed payment costs, and whether you can overpay without a penalty. And if you can't put a date on it at all, that's the most useful thing this exercise will tell you. A gap with no end date is usually a profit problem rather than a timing one, and it's better to know which you have before you take on repayments.

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Where an iwoca Flexi-Loan fits

If you're waiting on an invoice, a Flexi-Loan can cover the gap, and you can clear it with no early repayment fee once your customer pays.

That's the situation we're built for. It's worth saying what we don't do, too: we don't take a cut of your daily card sales, we don't need your sales ledger, and we don't take a charge over your property. An iwoca Flexi-Loan is a business loan with flexible repayment options: an agreed amount, a fixed term, and monthly repayments.

The difference from a bank's loan shows up when you want to repay early. You choose a fixed term of between 12 months and five years, so you know the repayment schedule from the outset, and because there's no fee for repaying early you can clear it as soon as the cash arrives – many of our customers only take out our finance for a few weeks, or even days. You also have 30 days to draw the money down after approval, so the funding can be agreed before you need it and taken in the week you do.

Flexi-Loan in action: VCare24

Victoria Simpson's social care business waits on local authorities to pay for care it has already delivered. She draws around £200,000 to cover payroll and pays it back within a week, as those payments come in.

Read Victoria's story

What it won't do is turn a declined application into a funded one. A different lender means a different assessment, not a guaranteed yes.

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What it costs and what you're signing up to

Interest is charged on what you've drawn, for the days you hold it. The rest, in one place:

• How much: from £1,000 to £1 million.
• Term: a fixed term of between 12 months and five years, with no fee for repaying early.
• Cost: our business loan calculator shows what it would cost for your own amount and term.
• Personal guarantee: every new Flexi-Loan needs a personal guarantee from at least one director. Not every director has to sign, and no property is taken as security at the start of the loan.
• Who we lend to: we lend to UK limited companies.

A decision is made within 24 hours, but it might be longer depending on the complexity of the request. A quick decision isn't a light one: we look at your revenue and what your business can afford to repay before we make an offer, and our credit team reviews larger or more complex applications.

A Flexi-Loan won't be the cheapest money on this page. If cost matters to you more than timing, asset finance secured on the thing you're buying, or a grant if you qualify for one, will usually come in lower. If something does go wrong, our complaints process sets out who to contact and when to expect an answer.

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Alternative business funding FAQs

Can I use multiple forms of alternative business funding together?

You often can, and running a loan alongside invoice finance is common enough.

Check both agreements first, though. Some funders restrict additional borrowing while their facility is open, and security one lender has taken can stop another lending at all. Ask each of them before you sign the second.

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Is alternative business funding good for bad credit?

A thin or adverse credit file usually narrows your options and raises the price rather than ruling you out.

The routes that lean on it least are the ones secured on something: an asset, your invoice ledger, or your card takings. Putting a file right takes time, so it's worth checking your business credit report before you apply rather than after.