| Credibly’s founder, Ryan Rosett, notes, “Deciding between a private lender and a bank for your small business financing comes down to your situation’s urgency, your qualifications, and your priorities. Both have their place, depending on your circumstances.” |
This point is precisely why we wrote this blog. In it, we will explore:
- What a private business lender is
- When to choose one over a bank loan
- Where to find private business lenders
- How to choose the right lender for your business
What are private business lenders?
Private business lenders are non-bank institutions or individuals that provide financing to businesses in the form of loans, lines of credit, or other funding arrangements.
A private business loan is a type of business financing provided by a lender outside of a traditional bank. This option is vital in the small business world, since small businesses often need financing options that are fast to access.
Unlike raising money from investors (which can require giving up equity in your company), borrowing from a private lender is a form of business financing that keeps your ownership intact. These private funding sources can include specialized business financing companies, online fintech lenders, private equity firms, or investment groups.
Private lenders generally operate with fewer regulations than banks, which allows more flexibility in how they evaluate businesses and structure loans. This flexibility is a positive. For instance, Credibly is better able to assess your business performance, not simply your credit score.
However, this same flexibility is also why you must be proactive while finding private money lenders.
You can get financing in as fast as 24 hours.* |
When to choose private business lenders vs. a bank
If your business has strong credit, solid financials, and you aren’t in a rush, a bank may be a viable option if you need a loan. While that sounds simple, it’s rarely simple in practice. Qualifying for a bank loan can be challenging, which is why it’s typically long-established businesses that opt for this option. In fact, only 16.5% of smaller businesses use bank loans.
Choose a private business lender when you need funding fast, don’t fit strict bank criteria, want more flexible structures, or operate in an industry banks often treat as high-risk.
In practice, there are a wide range of reasons your small business may not meet all of the criteria the average bank would expect, so here is a list of situations when a private business lender may be a better option.
1. You need funding fast
Banks can take weeks (or even months) to process business loan applications, whereas private lenders often can provide funding in a matter of hours or days. This speed is vital if you’re facing an emergency expense or a fleeting opportunity.
2. Your credit or financials would not qualify at a bank
Banks have strict eligibility requirements. While these requirements vary, the typical bank’s requirements are as follows.
- A strong personal and business credit score (often 680+)
- Multiple years of profitable financial history
- Collateral to secure the loan
If you fall short on these criteria, a bank loan might be out of reach. Private business lenders, by contrast, specialize in working with borrowers whom banks might reject. They tend to focus on cash flow and overall business performance rather than just credit scores.
3. Flexibility matters
Private financing often offers more flexible structures and remittance terms than traditional banks. Though not a loan, they might offer products like merchant cash advances2 that convert future receivables into upfront cash. They may also provide lines of credit that you can draw on as needed.
Banks, by contrast, usually provide more rigid, one-size-fits-all loans. These come with a fixed payment schedule and strict covenants. If your business’s cash flow is seasonal or unpredictable, a private financing solution is typically more accommodating.
4. Your industry or situation is frequently labeled as “high risk”
Certain industries and situations are viewed as “high risk,” which makes banks hesitant to lend. Businesses that have a mid-to-high risk label have approval rates of less than 50% at both large and small banks.
Examples of industries that a bank may label as “high risk” include those with highly seasonal revenue streams or those with potential regulation complexities, like tobacco products.
Private lenders are often willing to work with a broader range of industries and situations. If your business struggles to get bank financing, a private lender could be a viable alternative.
Similarly, if you don’t have collateral to pledge (many bank loans require collateral like real estate or equipment), you might turn to a private lender since some private loans are unsecured.
| Learn more about how your small business can get funding fast |
Where to find private business lenders for your SMB
Finding private business lenders has become easier than ever. Most operate online or have nationwide reach, so you aren’t limited to local providers. Here are some of the main avenues and sources you can use to locate reputable private lenders.
| Source | What it offers | How to use it |
| Online lending platforms and fintech websites | Centralized access to private lenders offering business loans, merchant cash advances, or credit lines. Some platforms lend directly, while others compare offers from multiple lenders. | Search online for “small business loans.” Use comparison platforms to fill out one application and review several loan offers. Check lender reviews and ratings for credibility. |
| Referral marketplaces and loan matching tools | Digital tools and broker services that match your business with lenders suited to your profile. Often include alternative and private financing sources. | Use loan matching sites or work with financing experts to find lenders more likely to fund your business type. Confirm any broker fees and assess platform reputation. |
| Industry-specific directories and networks | Online directories and associations focused on specific industries, where specialized lenders often advertise. These sources help locate niche lenders familiar with your sector. | Search for “[Your Industry] business loans” or “[Asset] financing lenders.” Use trade associations or professional networks to identify lenders experienced in your field. |
| Local and community channels | Regional business groups, chambers of commerce, credit unions, and community development financial institutions (CDFIs) that connect entrepreneurs to private capital sources. | Attend local business meetups, contact CDFIs, or explore community investment programs. Verify lender legitimacy and confirm all terms in writing. |
How to find private business lenders that fit what you need
Once you have a list of potential private financing options, you need to evaluate them and choose the one that best aligns with your business’s needs and circumstances. Here are key factors and steps to consider when vetting and selecting a private business lender.
1. Define your financing requirements
Start by being clear on what you need. How much capital are you looking for, and what will you use it for? Is it for a short-term option (that you expect to pay off in a few months) or a long-term growth project? Do you need the full amount upfront as a lump sum, or do you prefer a line of credit you can draw from over time?
By pinning down the amount, timing, and purpose, you can narrow the field to lenders that offer the appropriate type of financing. For example, if you determine you need flexible working capital to manage cash flow ups and downs, you might focus on lenders offering lines of credit or merchant cash advances.
2. Check your qualifications
Just as you evaluate lenders, they will be evaluating you. Check the typical eligibility requirements of any private lender on your shortlist to ensure your business meets them. These requirements will vary, but common eligibility criteria include:
- Most private lenders want to see that your business has been operating for at least a certain number of months. A typical minimum is 6+ months in business.
- Private financing providers place huge emphasis on your overall cash flow health. Unlike banks that might lean heavily on collateral, private lenders often approve unsecured or revenue-based financing. They want to be confident your business is bringing in enough money to satisfy the obligation. A common requirement is at least $15,000 in monthly bank deposits, though exact thresholds vary by provider and product.
- Private lenders do check credit, but their thresholds are much more forgiving than banks. In many cases, a 500+ personal credit score can be enough to qualify for alternative financing.
- Many private business loans are unsecured. This means you do not have to put up specific collateral like property or equipment. However, almost all will require a personal guaranty from the business owner(s). A personal guaranty means you personally promise to remit the debt if the business cannot.
- One way private lenders keep their process fast is by limiting the documentation needed, but there are still a few key documents you should be prepared to provide.
3. Match financing to your needs and timeline
Not every financing provider works at the same speed. Banks move slowly and often require high credit scores and long reviews. That delay can stall your plans when timing matters.
Focus on a financing provider that regularly works with businesses like yours and can move fast. Credibly, for example, can process applications in as fast as 2 hours and provide financing in as little as 4 hours.
This keeps you from wasting time on applications that drag on for weeks. When the provider fits your profile and your timeline, you can move from application to decision much faster and get back to running your business.
4. Consider the impact on your credit and business finances
Before moving forward with any financing, check how the application and remittance process could affect your credit score and day-to-day business operations.
Many private lenders start with a soft credit inquiry during the prequalification stage, which won’t affect your credit score. Some may perform a hard credit pull later in the process, but usually only after you agree to the offer. Always ask the lender to confirm how your credit will be checked before you proceed.
5. Look for value-add and support
Lastly, consider any additional value a lender brings. Do they have a responsive customer support team or funding specialists who can answer your questions? You may prefer a lender that provides guidance throughout the process.
Some lenders will assign you a dedicated financing expert or support rep, which can be helpful, especially if you’re new to business financing. Also, check if the lender reports your payment history to business credit bureaus. If building business credit is a goal, working with a lender that reports positive payment history can be beneficial to you.
Not all private lenders do this, so ask if it matters to you.
Private business lender FAQs
What is a private business lender?
A private business lender is a non-bank institution that provides financing to businesses in the form of loans, lines of credit or other funding arrangements. These lenders use their own criteria and processes, which are often faster and more flexible than traditional banks.
When should I choose a private business lender instead of a bank?
A private business lender may be a better fit when you need funding quickly, don’t meet a bank’s strict criteria or want more flexible structures than a traditional business loan. They can help when you’re dealing with cash-flow gaps, time-sensitive opportunities or you operate in an industry banks consider higher risk.
What do private business lenders look for in my business?
Private business lenders place huge emphasis on your overall cash-flow health and the strength of your business operations. Many look for at least six months in business, consistent monthly bank deposits (for example, around $15,000 or more) and a personal credit score starting around the 500s, along with your ability to handle existing obligations. Each private lender sets its own criteria, so it’s important to review their requirements before you apply.
How fast can private business lenders provide funding?
Some private business lenders can provide funding very quickly. In some cases, you can get financing in as fast as 24 hours, and providers like Credibly can process applications in just 2 hours and provide financing in as little as 4 hours on some files. Actual timing depends on the lender’s process and how quickly your information and bank can be verified.
Disclosures
1Some products are made available through Credibly’s network of external funding partners.
2Credibly merchant cash advances, and working capital loans to merchants in California, are provided by Retail Capital LLC. All other Credibly products in all other jurisdictions are provided by Credibly or Arizona LLC.
3$15K+ avg. deposits for a three-month average and the most recent month.
*Available on some applications only. Timing depends on your file and your bank’s processing times.
