The COVOD-19 crisis will pass, hopefully sooner than later. For many businesses the government sponsored small business relief in the CARES Act along with other federal, state, and local relief programs will have been helpful in pulling companies through the virus-induced shutdown. But when the smoke clears we expect that most businesses will have a string of months during which cash flow is negative. Inevitably, this will result in a loss of equity, a reduction in borrowing ability, and potential short-term cash crunch.

Some business owners will have the personal resources to shore up their balance sheet by replacing lost equity and borrowing necessary operating capital through traditional lines of credit or secured term loans. But others, with weakened balance sheets, will find it difficult to secure traditional bank financing. In these cases, non-bank or “alternative” lenders may be a viable solution to accessing working capital to fund operations. These non-traditional lenders typically have creative, flexible financing solutions with no or few financial covenants that are designed to help businesses with short-term cash needs. While more expensive than traditional bank financing, alternative lending can be a useful tool in the toolbelt for businesses recovering from the COVID-19 downturn.

Typical non-bank financing structures include: