3. SBA loans
The US Small Business Administration (SBA) does not make direct loans, but it does guarantee loans made by participating lenders. Depending on your business and how you intend to utilize the funds, you can apply for various SBA loans.
Although the application and approval process might be time-consuming, the guarantee can make it easier to obtain a large loan on favorable terms, even if you need excellent credit.
• The SBA 7(a) loan program, which offers up to $5 million in capital, is among the most popular. In 2021, startups received approximately 17% of SBA 7(a) loans.
• If you’re looking to buy real estate or equipment, the SBA 504 loan program may be a suitable choice, although just 10% of those loans went to startups.
• The Community Advantage lending program is for businesses in underrepresented communities, and startups received 45% of these loans in 2021.
• The SBA microloan program provides up to $50,000 to establish or expand a firm, though the SBA does not specify how much of that amount went to entrepreneurs.
You can also utilize the SBA’s lender matching tool to identify participating lenders and compare loan offers based on your circumstances.
4. Local business financing
Traditional business loans are available from local credit unions, community banks, and nonprofits. Although rates, terms, and requirements differ by lender, smaller lenders are more willing to work with you based on your experience than giant banks or online lenders.
Some lenders may also participate in local or statewide loan guarantee programs similar to those offered by the SBA.
5. Crowdfunding
Online crowdfunding sites can assist you in organizing a campaign and raising funds from strangers as well as individuals you know. Crowdfunding is classified into four types: debt, equity, donations, and prizes.
With equity, you raise funds in exchange for a share of your company, but with a loan or bond, you incur debt that must be repaid with interest. Donor crowdsourcing, such as GoFundMe campaigns, is rarely employed by startups because you have little or nothing to offer in exchange. Consider a rewards-based campaign in which you offer donors one of your company’s products or services in exchange for their contributions.
