Alternative Lender
An alternative lender is any non-traditional financing provider serving small businesses — encompassing fintech lenders, MCA funders, online business loan platforms, P2P lending, and specialty finance companies — distinct from traditional commercial banks in product offering, technology, and target merchant profile.
Why This Matters
Alternative lending emerged in response to traditional bank withdrawal from small business lending after 2008-2009 financial crisis. Traditional banks largely abandoned sub-$100K commercial loans due to operational economics; alternative lenders filled the gap with technology-enabled origination at this market size. The category encompasses many models: pure-play fintech lenders, MCA-specialized funders, online term loan providers, business credit card-focused fintechs, equipment finance specialists, and embedded finance platforms. Combined, alternative lenders now originate the majority of US small business credit by deal count.
Frequently Asked Questions
Frequently Asked Questions
Are MCA funders the same as alternative lenders?
MCA funders are a subset of alternative lenders. The broader alternative lending category includes MCA, online term loans, lines of credit, equipment finance, factoring, and other small business credit products outside traditional bank lending. Many alternative lenders offer MCA as one product within broader portfolio.
What's driving alternative lender growth?
Persistent traditional bank withdrawal from small business lending, technology enabling efficient origination at small ticket sizes, embedded finance partnerships expanding distribution, and small business preference for digital-first financing experiences. Growth has continued despite economic cycles, with category expanding from $5B in 2014 to $50B+ today.