As the debate rages on concerning the speed of America's economic "recovery," we cannot deny the fact that small businesses are suffering when it comes to loans. Small business lending has been constricted in recent years by regulations and banks that are holding on to their capital for dear life. Historically, small businesses have relied heavily on loans in order to get off the ground; however, those days are fading fast. In short, many of today's banks are simply failing small businesses. According to Trepp, LLC's recent Capital Adequacy Stress Report, of 6,000 U.S. banks found, one in eight received a "failing" grade. Failing banks simply cannot lend, so that makes it hard for small businesses. Meanwhile, Trepp, LLC also reported that nearly 40% of bank losses came as the result of poor commercial real estate loans. Considering the shaky real estate market and the fact that the public's willingness to spend has come to standstill, perhaps it comes as no surprise that approval rates for small business loans are reaching massive lows. Despite the bleak banking scene, hope still exists for small businesses looking for a hand. Alternative lenders and small banks are seeing an increase in approval ratings according to the Biz2Credit Small Business Lending Index. Meanwhile, big banks and traditional lenders are seeing a drop. The bottom line is this: small businesses seeking loans have options. Factoring Factoring requires a business to sell its accounts receivables in order to raise capital. Interest rates for businesses who decide to go through the factoring process are relatively high; regardless, it may be the only option for certain businesses desperate for cash. Oftentimes, commercial finance companies offer such financing to small businesses. Peer-to-Peer Lending Peer-to-peer lending is a viable borrowing option for small businesses looking to bypass the big banks. As traditional lending tightens, peer-to-peer funding allows a small business to simply borrow from another individual. Many peer-to-peer transactions happen online through sites that offer and specialize in such funding. Loans obtained through peer-to-peer lending often have relatively low interest rates. However, the amount a business can borrow through such loans is also relatively low, as well. Furthermore, many peer-to-peer lenders will only loan to other individuals rather than the entity of a business. Such limitations could prove problematic for some business owners, although it may be advantageous to entrepreneurs running a business on their own. Merchant Cash Advances Merchant cash advances represent a prime example of how a small business today can stay afloat while facing a credit crunch. Merchant cash advance lenders approved as much as 64.5% of applications in recent months according to the aforementioned Biz2Credit Index. What exactly do merchant cash advances entail? Specifically, such advances represent a deal between the lender and business in which the lender purchases part of the business' future credit card income. The lending party obtains a fixed percentage of business' credit card sales, meanwhile there are no fixed payments required on behalf of the business. Additionally, merchant cash advances do not require a fixed interest rate. Businesses seeking cash today are simply not getting what they need from big banks. Thankfully, small businesses seeking capital have a number of viable options thanks to alternative lenders. While the waters of today's economic remain murky, alternatives to traditional small business loans provide a glimmer of hope to companies in need. Photo credit: cuinsight.com Megan Totka is the Chief Editor for ChamberofCommerce.com which is a business directory on the web. ChamberofCommerce.com connects local businesses to their local Chamber of Commerce. Megan also writes business news.