Loans must be repaid with interest, but they’re widely available and can provide significant capital.
Options include:
Bank Loans: Traditional business loans from banks. You’ll need a solid business plan and often collateral. SBA Loans (U.
S.): These are bank loans guaranteed by the U. S. Small Business Administration.
The SBA doesn’t lend directly, but it backs loans up to $5.5 million, making banks more willing to finance you. Advantages include competitive rates and longer terms. For very new startups, the SBA’s microloan program (up to $50k) is worth exploring.
Online Lenders:
Fintech platforms like Kabbage, BlueVine, or Lendio offer quicker loans or lines of credit, though at higher interest. Good for short-term cash flow.
Business Credit Cards and Lines of Credit:
For smaller needs, 0% intro-rate credit cards or business lines (like a credit line from a bank) can bridge gaps. Use sparingly to avoid debt traps. When considering loans, note: - Qualifications: Credit history, collateral, and revenue matter.
Lenders will scrutinize your finances. - Interest and Terms: SBA loans have interest rate caps; a 7(a) loan can offer modest interest and up to 10-year terms on working capital. Microloans might have 8-13% rates.
- Use of Funds: Loans can fund equipment, inventory, payroll, or expansion (but usually not investor payouts). Plan a budget to use every dollar effectively. -
- For example, BMO’s guide notes: “Borrowers can apply for as little as $500 or as much as $5.5 million” under SBA programs, with features like waived collateral on some loans.
This flexibility can help you get working capital or asset financing with relatively favorable terms.