When Banks Say No: How to Find Alternative Debt Financing Options

What do you do when a bank won’t lend you the money you need to grow your startup? It can feel like a punch in the gut, not being able to secure the proper funding for your business—we get it. Often, banks have strict guidelines they can’t falter on, preventing them from lending money. Sometimes, it’s the market itself that limits banks from lending.
If you’ve gotten the metaphorical door shut in your face, don’t fret. There are alternative debt financing options out there. In this article, we’re going to help you navigate the rocky seas of fundraising when banks say “no.”

What are Some Reasons Banks Might Not Lend Money to Startups?

Bad credit, a limited credit history, or insufficient collateral can hinder your ability to secure a bank loan. Not to mention, if your startup is already in too much debt, banks won’t be able to lend funds to the business. Other times, banks refuse to lend money to startups because the business:
  • Has a poor business plan
  • Is part of a risky industry
  • Has insufficient cash flow
  • Shows little proof of its ability to repay the loan
While these factors might deter a bank from engaging, there are other pathways to receiving funding that will keep your dream alive. Now, let’s take a look at some alternative debt financing options.

What are Alternative Sources of Debt Financing?

According to NerdWallet, “Alternative lending, sometimes called online or fintech lending, refers to any loan that’s available through a nonbank lender.” Let’s take a look at a few debt financing alternatives:

Venture Debt Provided Through a Lending Firm

Venture debt provided as a loan through a specialty lending firm and is perfect for companies that have strong revenue performances over a long period of time. While the loan does need to be repaid, one of the biggest benefits of venture debt is that there is typically no equity dilution associated.

Term Loans

Term loans are a form of alternative debt financing where lenders allow you to borrow money that you’ll pay back, with interest, at fixed intervals. With proper negotiation, you can repay the loan on a weekly, bi-weekly, or monthly basis.

Lines of Credit

One of the best debt financing options available is to receive a line of credit. NerdWallet describes lines of credit as a way to “withdraw funds up to a predetermined amount—and only pay interest on the money you withdraw.” The best part? You can still draw on the line after you repay what you’ve borrowed.

Angel Investments

Angel investors are typically wealthy individuals who believe in the potential of a startup and will provide financial backing for equity in the business. This form of startup funding enables young businesses to cover foundational expenses, including product development, hiring, and marketing.


Crowdfunding occurs when a substantial number of people band together to raise money for your product or business. With donation-based crowdfunding, everyone who participates in the raise offers small investments from the kindness of their own hearts.
Check out our article, 6 Sources of Startup Funding: Your Options and Which is Best, to determine which alternative debt financing option is right for your startup.

How Can Companies Find Alternative Debt Financing?

The right capital partner will understand where companies succeed, and where they meet friction in securing venture debt—such as facing adversaries when banks deny funding. This partner will, in turn, help startups streamline the process and leverage their relationships with a multitude of lenders to secure optimal terms, increasing the chances of a successful and timely close.
At 5th Line, that’s exactly what we do.
Our expertise is in taking tougher credit profiles and structuring them for the right lenders to provide attractive terms. The end result is our clients secure funding and are able to continue driving toward their next phase of growth. But don’t just take our word for it, read what others we've worked with have to say:
“5th Line helped us identify lenders, get into the conversation, and complete a debt raise in a historically difficult market. The access to capital helps us play offense and continue to invest in growth, while many competitors cannot. [5th Line] was a pleasure to work with and provided great advice and counsel throughout the process.”
— Gautam Kumar, CFO,
“5th Line was a tremendous value-add to raising our debt financing in a time we needed it. We benefited greatly from their extensive network and strong relationships within the venture lending community.”
— Mike Berman, COO, Critical Mention

Final Thoughts

Has a bank said “no” to you recently? We’re here to help you and your startup reach its full potential with the funds you need. Our relationships with dozens of credit funds enables us to secure optimal credit terms for you. Get the debt financing you need to keep growing your business—get in touch to get started.