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Inject capital into your small business with these affordable loan options

Inject capital into your small business with these affordable loan options

Cash is king when it comes to running a small business enterprise. You need money to cover payroll, buy equipment, purchase inventory, train employees, run marketing campaigns, and more. Not everyone can afford to cover these costs out of pocket.

Thomas Dixon
Finance
Last updated: Feb 18, 2022 | Jan 24, 2022

Table of Contents

Cash is king when it comes to running a small business enterprise. You need money to cover payroll, buy equipment, purchase inventory, train employees, run marketing campaigns, and more. Not everyone can afford to cover these costs out of pocket.

That’s why you need affordable loan options to inject capital into your business and keep your business growing.

Don't panic even if you’re a minority business owner and your business registered with an ITIN number. Some online lenders offer ITIN loans to ensure that no entrepreneur is left behind.

Best traditional options for small business owners

Bank loans

Banks and credit unions are the top traditional lenders if you have excellent business credit, a long trading history, and a profitable business with substantial business revenues. You can access business loans at the lowest interest rates than you can find anywhere else.

However, banks are risk-averse and will not fund if you have a poor credit score or have just been in business for a few years. You should also be prepared to brace a lengthy, paper-laden application process and may have to wait for weeks to months to get approved.

SBA loans

The Small Business Administration (SBA) offers some of the best loans to inject cash into your business, especially when seeking startup capital.

Under the SBA 7(a) program, you get a business loan up to $5 million at favorable rates. SBA also offers microloans up to $50,000 with interest rates between 8% to 13%.

However, SBA loans have strict qualification criteria, and you'll have to brace an extensive, paper-laden application process. You'll also need to have clean credit history and a high credit score close to 700.

Venture Capitalists/Angel Investors

These private groups and individuals invest in established startups that show potential for profitability and explosive growth.

You pitch your business idea before them to show a proven record of success, and if you win them, they will make a direct investment in your business in exchange for an equity stake in the company and some degree of managerial control.

However, beware that VCs and angel investors are highly selective and only interested in groundbreaking business ideas that require an investment of at least $250,000.

Microloans

Microloans are excellent financing options for small business owners seeking smaller amounts of money. They offer a viable solution when you want more money than you would get with a personal loan but don't need the massive amounts provided by small business loans.

And unlike banks and SBA loans, they come with few requirements, easier application, and may be accessible to entrepreneurs with bad credit scores.

Depending on the lender, loan amounts may range from $5,000 to $75,000.

Alternative loans to get capital for your small business

Online lenders

Online lenders came as good news to small business owners. Unlike traditional lenders, they offer flexible loan amounts that fit your business needs at favorable terms.

They also have fewer requirements and are more likely to welcome borrowers with fair to good credit scores that have been in business for only a few years.

Again, fintech lenders offer an online, paperless easy application process, and once approved, you could get funded within 1-10 business days.

Even a few online lenders offer ITIN loans to immigrant business owners without Social Security Number (SSN).

Most online lenders will approve you for loan amounts of $2,000 to $400,000 with repayment terms ranging from 24-60 months.

Crowdfunding

Instead of going for a loan, you can raise small amounts of capital from individuals through crowdfunding sites like Kickstarter, Indiegogo, EquityNet, SeedInvest, etc.

Simply set up a campaign page on the site to tell your business story, your funding goal, and how you’ll use the money. Then invite potential backers to make donations.

You don't repay the money, but you may need to give up equity in your company, rewards, or future products for free or at a discount to encourage potential investors to fund you.

This can be a disadvantage to the entrepreneurs, for such incentives may cost more than the interest you could pay with a small business loan.

Peer-to-Peer loans

P2P loans provide a viable funding option to entrepreneurs seeking startup or expansion capital. You simply fill a simple online application to submit your loan request via a P2P platform like Prosper or Lending Club.

Individual investors then come in to fund a portion of your loan until it's fully funded. You then receive the money and make monthly repayment via the P2P platform.

Like online lenders, they offer flexible loan amounts & terms, fewer fees, and you stand a chance to score lower interest rates.

Other ways to obtain financing

ITIN loans

These are loans meant for minority entrepreneurs without a social security number. Such individuals register their businesses with an ITIN number, and many lenders turn them away.

However, a few online lenders offer ITIN loans to immigrant business owners. So make sure you look around and take advantage of them.

If the above methods don't work for you, you can also inject cash flow into your business through the following ways.

  • Personal savings
  • Family and friends
  • Personal loans
  • Lines of credit
  • Invoice factoring
  • Merchant Cash Advances (MCAs)

Visit the link in the intro to learn more about ITIN loans and how they work.

Thomas Dixon | He creates the ideal marketing experience by connecting online brands with their target audiences. He recently completed a research paper on consumer conversion and took part in a community project on SEO optimization. Thomas is working on his Bachelor of Arts in Communications and plans to intern in an online marketing department soon.

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