5/21/2021

Financial Guides

Top 8 PPP (Paycheck Protection Program) Loan Alternatives for Small Businesses

With the Paycheck Protection Program (PPP) coming to an end on May 31, 2021, it’s back to the drawing board for small businesses. Check out our top 8 best PPP loan alternatives.

Tim Wu
Tim Wu

Head of Growth

Table of Contents



With the Paycheck Protection Program (PPP) coming to an end on May 31, 2021, it’s back to the drawing board for small businesses. Many of them either depended on this government-backed loan or were hopeful of getting it to stay afloat.

Whatever the case, the PPP was a handy credit facility that helped businesses to meet payroll and non-payroll costs. With the end of the PPP program on the horizon, business owners will now need to look at alternative sources of financing for coronavirus relief. Below are the top 8 picks:

1. Grants

A business grant is basically money that’s given to a business to support its business activities. Most grants are offered by governments, non-governmental corporations, trusts and foundations. Contrary to loans, grants don’t have to be paid back. You also don’t lose equity, which is a good thing.

However, grants are usually very difficult to get because they have strict and specific eligibility requirements. Oftentimes they’re created for specific industries to serve very targeted causes. Nonetheless, below are some grants that are worth your consideration:

Is a Grant Good for Your Business?

Grants are arguably the best sources of business finance. Oftentimes you’ll get more than enough money to finance a cause or project. And you won’t have to pay it back.

The flipside is that grants don’t usually cover operational expenses or debts. In fact, you typically can’t get a grant to start a business. Therefore, if your business needs start-up capital, operational costs or money to settle debts, then you’re better off looking at other sources of financing.

2. Loans and Microloans

Most business owners still consider traditional loans and microloans as the go-to sources of business financing. That’s despite the fact that securing a business loan is usually a time-consuming process, particularly for startups and small businesses.

In fact, according to a Pepperdine University study, only 34% of small businesses receive traditional loans from their banks. That’s a pitiful figure compared to 75% of large businesses whose bank loans are approved.

One solution for small businesses is applying for a microloan. Compared to a traditional business loan, a microloan is smaller and easier to get. Amounts are typically under $50,000 and may be used for a range of purposes, including inventory, purchase of equipment, payroll, working capital etc.

The downside of microloans is that they come with higher interest rates compared to traditional loans. Besides, the lender may ask for a personal guarantee or collateral. A few examples of loans and microloans are:

Are Loans and Microloans Good for Your Business?

A loan or microloan is only given against assets. For that reason, either you or your business must have sufficient assets to get approved for a traditional loan or microloan. The good news is that loans can inject working capital to your business to help settle some expenses.

3. Credit and Credit Cards

It is possible to get credit financing either from your credit card or home equity loan. However, both are very risky options, especially the latter.

Taking a home equity loan to support your business means that you will put up your house as collateral. If something goes wrong, you stand to lose the house.

With that in mind, a credit card debt makes the better option. You can use your credit cards to pay expenses that are directly related to a business project. Once that project is done and the clients have paid, you can go ahead and pay back the credit card debt. Such a system minimizes the risk of default, which can hugely damage your credit.

It’s worth mentioning that your bank can also give you an unsecured business credit card. This is much better because it keeps your personal credit separate from business credit. Besides, business credit cards may help to build your business’s credit profile.

Are Credit Lines and Credit Card Debts Good for Your Business?

Personal credit lines and credit cards can be very helpful when used correctly. They are great for a business that doesn’t need a lot of money (like capital investment). That’s because they don’t offer large sums. But they can be lifesavers when you need to top up inventory, pay utility bills etc.

Besides, when repaid on a timely manner, credit lines and credit cards improve your overall credit rating. The converse is also true. A mistake in repayment can ruin your credit. Worse yet, you could lose your house if you take out a home equity line of credit.

4. Venture Capital and Angel Investment

Venture capitalists (VCs) and angel investors are just as similar as they are different. Both are individuals or groups of investors who pump cash into a business to provide start-up or expansion capital. Oftentimes angels and VCs do so in the hope that they’ll get some ROI.

The difference is that while VCs typically use investment money pooled from investment companies, funds, trusts etc., angel investors use their own money. Besides, venture capitalists tend to prefer investing in businesses that already exit. Angel investors, on the other hand, are more attracted to startups.

Therefore, the type of investor that you attract largely depends on where your business is in terms of development. That also means you stand to get different amounts from each type of investor. According to the SBA (Small Business Administration), the average angel investment is worth $330,000 while a venture capital averages $11.7 million.

Where can you get angel investors and venture capitalists for your business? Here are some straightforward options:

  • FundersClub: you can either get funding for your sole business or be grouped with other similar businesses and get collective funding.
  • MicroVentures: anyone can sign up and become an investor. This is good because business owners now have a huge number of willing angels and venture capitalists.
  • Gust: alongside matching business owners with potential investors, Gust also helps entrepreneurs to prepare documentation, identify gaps in their teams and pinpoint factors that can help their business to grow.
  • Circle Up: geared towards retail and consumer products.
  • Angel capital association: home to over 18,000 angel investors, ACA works with angel groups rather than individual investors.

Are Venture Capital and Angel Investment Good for Your Business?

The biggest draw to venture capitalists and angel investors is their easy will to invest in innovative concepts. For that reason, both are great options if your business constantly generates creative products, services and solutions.

However, most angels and venture capitalists will put you under pressure to return their investment. Some may even ask for equity and control. To make matters worse, getting this type of investment is notoriously difficult. Unless you’re sure that you have a game-changing product, you’re probably better off spending the time and effort on looking for alternative sources of business finance.

5. Peer-To-Peer Lending

Peer-to-peer lending is also called social lending or simply P2P lending. It involves collecting small amounts from many different lenders to create one large sum that you can pump into your business.

Most P2P platforms are based online. They work by matching business owners with potential investors. The said investors are not actually investing in your business, they are lending YOU money (personally). It’s then your responsibility to invest it into your business and pay them back.

Most P2P platforms cap the amount receivable at $25,000 to $35,000. Some of these platforms include:

  • Prosper: boasts over $3 billion worth of loans given out so far.
  • LendingClub: requires at least 2 years of business history with a minimum of $75,000 in annual sales.
  • Upstart: meant for younger entrepreneurs who have little to no income and shaky credit histories.
  • Funding Circle: works much like a bank save for the fact that you get money from P2P investors. Otherwise, you’ll still work with a loan manager and go through an underwriting process.
  • Peerform: best for business owners whose credit score is above 600.

Is Peer-To-Peer Lending Good for Your Business?

P2P lending is excellent for small businesses because it comes with extremely low interest rates compared to a bank loan. There are no hidden fees and charges, and you can get up to $500,000 depending on the platform you choose.

On the other hand, peer-to-peer lending is only suitable if you’re looking for a small loan. Despite some platforms offering as much as $500,000, it’s generally hard to qualify for such amounts. Besides, they require personal information before lending to you. That makes P2P inconvenient for an entrepreneur who wants to keep their business and personal lives separate.

6. Crowdfunding

Crowdfunding involves a “crowd” of individuals or organizations pooling funds to finance your project or business. For it to be successful, you need to be able to capture the attention of a large number of investors (backers). That mostly involves creating a highly innovative product, service or solution. That’s how you convince them that your project is worthy of their money.

There are four different types of crowdfunding campaigns. Donation-based crowdfunding allows people to give you money without expecting anything in return. Equity funding, on the other hand, lets backers get a share of your business.

Debt-based funding requires you to repay backers with interest. Finally, reward-based crowdfunding involves paying backers with non-monetary incentives – typically the product/service being created.

There are lots of crowdfunding sites, but the most popular are:

  • Indiegogo: set up your profile, tell your story, set a fundraising target (amount in figures), and ask for monetary donations. You can still keep the money even if you don’t meet the set amount.
  • Kickstarter: as straightforward as Indiegogo save for one thing: you don’t get to keep the money if you don’t meet the set amount.
  • Causes: created specifically for cultural, social and political projects. For that reason, it is perfect for nonprofit businesses.
  • Patreon: designed specifically for digital media businesses. You can get financing if you have a podcast, blog, subscription-based service or even web series.
  • Fundable: while other crowdfunding sites only require you to showcase the product/service you need money for, Fundable requires you to post your whole business. That includes your full range of products and overall business plan.

Is Crowdfunding Good for Your Business?

Although crowdfunding investors can finance an already-existing business or product, they generally have a soft spot for startups and new products. For that reason, crowdfunding is good for your business if you’re just starting out or if you’re rolling out a new product.

It is “cheap” and affordable financing for small businesses. However, crowdfunding also puts you under pressure to deliver the product as advertised. That includes meeting specific deadlines that you promised. 

7. Fintech Funding

Contrary to banks and other financial institutions, fintech lenders use big data, artificial intelligence and even blockchain to streamline the lending process. It is more transparent and puts money in the pockets of business owners faster than traditional lenders can. That’s why small businesses – which generally have high cash flows – are now turning to fintech credit facilities.

That said, a fintech loan is essentially a loan just like any other. It, therefore, requires the business owner to do due diligence before choosing a lender. Here are a few names to consider:

  • OnDeck: mostly looks at your business’s annual revenue when determining your eligibility for a loan. You can also get a line of credit from OnDeck.
  • PayPal: PayPal’s working capital is meant for businesses that use PayPal as a means of payment. You may qualify even if you have a low credit score.
  • Lendio: Lendio won’t actually originate a loan for you. Instead, it serves as an intermediary that links business owners with fintech lenders like OnDeck and Kabbage.

Is Fintech Funding Good for Your Business?


Fintech is great because it streamlines the lending process. That means your business can get and spend cash as soon as possible. However, research also shows that the typical fintech borrower is a “credit junkie”.

In other words, business owners who rely on fintech financing are more likely to spend beyond their means, borrow again and ultimately sink into debt. Of course, this boils down to personal discipline but it’s worth a mention, especially in the context of business. Mismanaging debt can be detrimental to a business of any size, let alone a small one.


8. Self-Funding

One common way of putting money into your business is tapping into personal savings. For small business owners, this often means giving up luxuries in order to keep the business running. For example, rather than taking a vacation or buying a new car, you can use that money to support the payroll.

It’s not uncommon for business owners to ask friends and family for investment. This is especially the case when personal savings are insufficient to meet the business’s financial needs. In which case you’ll need to decide whether to take the money as a loan or sell them equity.

Is Self-Funding Good for Your Business?

Most entrepreneurs use self-funding to start their businesses. It’s an ideal source of financing because it gives you full control over the business. That means you have the freedom to run and operate as you see best and you’re not answerable to investors. Plus, it removes the pressure that comes with a loan or line of credit.

On the other hand, not many people can afford self-funding. The closest alternative – asking friends and family for investment – is just as risky as taking out a loan. When things go wrong (which they always do) your family/friend relationships will be affected.


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