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The basics:

• Alternative financing ecosystem expanding beyond traditional banks
• Businesses may turn to asset-based lending when bank loans fall short
• Crowdfunding offers capital access for early-stage companies
• NJEDA Angel Match Program supports startup growth in New Jersey

Sometimes, businesses in need of financing have to think beyond old-school lenders. For example, a New Jersey-based medical device manufacturer had a “solid product and consistent revenue, but couldn’t qualify for a traditional bank loan,” according to Mariel Giletto, the Cherry Hill-based Business and M&A Practice Group Lead at Flaster Greenberg PC.

“The challenge for my client is that their capital ownership structure carries some complexity, including convertible debt issued during the startup phase,” Giletto explained. “That complexity is enough to make conventional banks uncomfortable, even though the business fundamentals are sound.”

Her client, however, was able to get an asset backed loan, where a loan or line of credit is secured by something the company owns – like inventory, equipment or property – instead of relying solely on cash flow. An ABL is usually advanced by a specialized lender and generally carries a higher interest rate, compared to a traditional bank loan, but it can be a lifesaver for businesses that have hit a wall with traditional lenders.

“This company uses their ABL for working capital, and has extended the approximately $5 million note a few times,” Giletto says. “The complexities in their structure turn off conventional banks, but asset-based lenders can look past that and focus on what the company actually has.”

Giletto – whose practice covers real estate, family-owned businesses and manufacturers, including those serving the pharma and biotech sectors – says the type of assets that serve as collateral in an ABL vary considerably by business model. “What’s consistent, though, is the underlying logic: lenders extend capital against the value of what a company owns, not just what it earns,” she explained.

Business owners considering ABLs should go in with a clear understanding about interest rates. “I’ve seen a range, and it depends on the strength of the financials and the underwriting,” Giletto detailed. “But rates tend to be higher than conventional financing — you’re getting a more creative, flexible solution, and that comes with a cost. It’s a classic risk-reward tradeoff: the lender is taking on more complexity, and the pricing reflects that.”

On the rise

For many owners, though, the cost is worth it. “ABLs are commonly used for working capital — the lifeblood of any growing business,” Giletto said. “It lets companies invest in the areas that drive scale: new hires, expanded production, broader sales reach. Critically, it can also provide the financial stability a company needs to eventually qualify for conventional or other financing down the road. My medical devices client, for example, is a perfect candidate for a private equity investor, since it has strong, recurring cash flow, a defensible market position, and significant growth potential.”

If your company is seeking alternative financing, you need a creative attorney who understands the distinctions and is flexible enough to help you strategically achieve your goals.
– Mariel Giletto, Business and M&A Practice Group Lead, Flaster Greenberg PC

Demand for this kind of alternative financing has been growing, she added. “M&A activity stalled last year, leaving many companies that might have sought an exit instead needing fresh capital to operate and grow. With M&A picking up again in 2026, that demand hasn’t eased — if anything, companies need to be well-capitalized to be attractive acquisition targets. But navigating the differences between asset-based and conventional financing isn’t simple, and the stakes are high.”

Business owners shouldn’t go it alone, Giletto cautioned. “If your company is seeking alternative financing, you need a creative attorney who understands the distinctions and is flexible enough to help you strategically achieve your goals.”

Small and mid-sized business owners in New Jersey who can’t qualify for a traditional bank loan have alternatives, if they’re willing to dig a little. Another substitute is crowdfunding, which has emerged as a viable – if sometimes misunderstood – path to raising capital. But like any financing tool, it comes with nuances that can make or break a campaign.

“Crowdfunding is simply another way to raise capital — raising money online,” says Mark Roderick, a partner with Mount Laurel-based Lex Nova Law who focuses on crowdfunding and fintech matters. “Companies tend to turn to it when they’re early stage and don’t have enough assets or revenue to qualify for a traditional bank loan, or when debt capital just isn’t available to them.”

Two tracks, widening gap

The crowdfunding landscape has split into two distinct tracks, he said. “The first involves raising money online from accredited investors — typically high-net-worth individuals with more than $1 million of investable funds. This approach has proven popular and successful,” and Roderick says he is seeing more demand from companies pursuing it.

The second track, raising money from non-accredited (everyday) investors under U.S. Securities and Exchange Commission rules known as Regulation CF, is a different story. “It was supposed to be a game changer — democratizing access to investment opportunities for ordinary Americans,” Roderick says. “But crowdfunding under Reg CF has fallen into a rut.”

Companies tend to turn to [crowdfunding] when they’re early stage and don’t have enough assets or revenue to qualify for a traditional bank loan, or when debt capital just isn’t available to them.
– Mark Roderick, partner, Lex Nova Law

A key reason, he argues, is the behavior of the large funding portals – platforms like Wefunder and StartEngine – through which all Reg CF offerings must be conducted. Under SEC rules, a company must state a minimum fundraising target. If it doesn’t reach that threshold, all money is returned to investors.

The problem, Roderick explains, is that some portals have gamed the system. “Say a company genuinely needs a million dollars,” he detailed. “But a big portal might set the minimum at only $10,000. So, if the company raised $30,000, the portal [which typically charges fees of 5% to 7% of funds raised] declared it a success and collected its fee — but the company would fail because it never had enough capital to operate.”

That has “destroyed the reputation of the industry,” Roderick warned. “Serious investors have stayed away. It became a vicious circle — portals take shortcuts, which drives away serious investors, which means less money in the industry. The average Reg CF raise today is roughly $100,000 to $150,000 — far below the $5 million maximum allowed under the rules, and often not enough for a company to thrive.”

The right fit

Despite the challenges in the non-accredited space, crowdfunding can still be a smart move for the right kind of business. Roderick cited companies he has advised that have a built-in customer base and want to convert those customers into investors — a local craft brewery, for example, that can market a crowdfunding campaign to its loyal regulars.

Crowdfunding is also appealing to founders who philosophically want to “democratize” their ownership — people who could attract wealthy investors but prefer to bring ordinary Americans along for the ride, he added. “And it suits early-stage companies that need capital for growth – marketing, hiring – but lack the track record banks require.”

Geography matters too, Roderick notes. “Most accredited investors are concentrated in Silicon Valley, New York City and Chicago,” he said. “If you’re not in those circles, you may not know enough wealthy investors to run a successful private raise, but crowdfunding opens the door to a much broader pool.”

He characterizes New Jersey as not “particularly tech-forward” — making online capital formation tools especially relevant for Garden State entrepreneurs who lack ready access to venture networks.

For business owners considering a Reg CF raise, the process begins with finding a funding portal willing to accept the offering. The company then files a Form C disclosure document with the SEC before going live on the portal’s website. From there, it’s largely a digital marketing exercise — emailing existing customers, hiring marketing firms and building an online audience of potential investors.

Roderick, who has been advising on crowdfunding since the JOBS Act of 2012 first opened the door for online capital formation, helped one small gin maker successfully complete a Wefunder raise — a reminder that the model can work when executed carefully.

His advice for N.J. business owners? “If you’re targeting accredited investors, the outlook is bright. If you’re considering a non-accredited raise, go in with eyes open — and set your minimum fundraising target at the actual, realistic amount your business needs to succeed, not a penny less.”

Another option

When AlphaRoc Inc. – a Newark-based artificial intelligence company – was looking for capital to get off the ground in 2021, management knew that traditional bank financing was not an option, according to co-founder and Chief Operating Officer Vineet Kapur.

“Banks typically look for physical collateral,” he noted. “But as an IT company, our assets are primarily composed of intellectual property. We don’t have physical assets to provide as collateral to secure traditional financing.”

Eventually AlphaRoc – which uses AI to provide predictive, real-time insights into investment opportunities, business economic health and consumer sentiment – partnered with the New Jersey Economic Development Authority.

“We were approved for approximately $500,000 in early-stage funding through the NJEDA’s Angel Match Program,” Kapur detailed. Under the initiative, the NJEDA matches angel investors’ direct investment in early-stage, targeted industries on a 1-to-1 basis.”

AlphaRoc used the capital to continue building out its technology platform and expand its sales force. But for Kapur, the decision to pursue state-backed financing was about more than just dollars.

Deepening relationship with NJ

“It was also an opportunity to deepen our relationship with the state of New Jersey,” he said, adding that the partnership has helped establish AlphaRoc as a committed player in the state’s growing tech ecosystem.

The company has continued to grow since receiving the NJEDA funding — and now has some 20 employees. Kapur calls the experience “positive from start to finish.” He “wholeheartedly” recommends the NJEDA to other early-stage companies facing similar barriers to conventional financing. “For a company like ours, it was exactly the right fit,” Kapur said. “We plan to continue building and growing, and this kind of early support made that possible.”

What’s emerging in New Jersey is something bigger than a collection of financing workarounds. Instead, a diversified capital ecosystem is emerging — one that increasingly rivals the networks long concentrated in places like Silicon Valley and New York. For Garden State entrepreneurs willing to look beyond the bank, the opportunities are growing.