BizSugar.com › Raising Capital › Definition of Alternative Business Capital

Entrepreneurs often face the need for alternative sources of business capital to traditional bank financing but are often unable to find them. Similarly, they can find themselves at a loss to understand how this form of capital differs from traditional bank financing. Banks make loans and extend lines of credit to a business based on its underlying assets and other assets available to the business owner to collateralize or guarantee the financing. It’s important to note that traditional banks are subject to federal regulation which restricts how much a business can borrow or leverage. For example, in a high growth business the assets available to support traditional bank financing often cannot keep pace with its need for capital. This is when an alternative source of business capital may become necessary.