Owning a small business is always a challenge, but especially when the economy is in a well documented downturn.

The Federal Reserve recently noted more banks are raising lending standards for small businesses, blaming tightening credit conditions on a less favorable economic outlook. The current credit crunch's effect on small businesses across the country leaves many unsure where to turn for financing to expand, renovate or manage seasonal fluctuations. Where can small business owners go when the bank isn't an option?

This was the situation New York restaurateur Arlene Weston found herself in when she decided it was time to build on her Jamaican heritage and open her own restaurant. Weston applied for several small business loans, but after facing a denial she emptied her savings account and borrowed money from her grandmother. She scraped together as much cash as possible and opened a small, two-room restaurant in New York's trendy Chelsea neighborhood.

It didn't take long for Weston's restaurant to become a critically acclaimed talk of the town. The original restaurant only seated 40 people and Weston saw the opportunity to expand by adding a third room. Unfortunately, she'd already tapped out her personal financial resources and appeared too large a credit risk for a traditional small business bank loan.

Then Weston got creative. Her restaurant had always accepted credit cards from customers as a form of payment so she took advantage of something called a Merchant Cash Advance.

A Merchant Cash Advance (MCA) is not a loan, it requires no collateral, has no interest rate, fees or penalties. With an MCA, a company will purchase a certain amount of a business's future credit card receivables at a discount in exchange for providing immediate working capital to the business. The MCA provider works directly with the credit card processor to take a small fixed percentage of daily credit card receipts until the obligation is fulfilled. Unlike a traditional loan with fixed payments, an MCA stays in line with a business's receivables - the MCA provider gets paid only when the business gets paid. The result is a cash-flow-friendly way to obtain business capital.

MCAs, such as the one Weston obtained through AdvanceMe, are an innovative funding stream for small businesses with 50 or fewer employees and less than $10 million in revenue. The primary requirement is that a business accepts credit cards as payment. Most providers offer very high acceptance rates as they are able to evaluate risk differently than other financial providers. Common criteria most providers review are the time in business, current status with a landlord, the average credit card activity for four to12 months and the status of other current financial obligations. These variables, in large part, determine the specifics of each deal.

As lenders tighten their standards to minimize risk businesses are turning, in larger numbers, to alternative funding streams when their primary bank is not an option. These may include credit unions, Web-based social lenders and merchant cash advance companies.

A recent survey by Capital Access Network of more than 250 small business owners revealed a growing need for alternatives. An overwhelming majority, 81 percent, feel it is important to have access to a line of credit that is readily available and predictable in today's economic environment.

Once an alternative solution is identified, business owners should be sure to perform due diligence and make sure their chosen provider has a long track record of success helping businesses like theirs. Entrepreneurs should also do homework to identify the funding company's history and make sure they adopt industry best practices. Careful consideration of creative funding outlets will help ensure their small business can maintain operations during tough financial times.

Today, Arlene Weston's restaurant is three times its original size and seats 100 guests and she's working on a second location in Harlem.