There are a few different ways that you can get a loan for a small business. Some are easier than others.
In this post, I’m going to share a few different places that you can go to get a loan for your small business. If you didn’t know, I’m really passionate about crowdfunding and I’m super pumped about some of the newer financial tools that are emerging to make it easier for businesses to get funding, like Kickstarter, Indiegogo, and equity crowdfunding.
You could be looking to start a physical store, ecommerce store, or other type of business. Let me know in a comment below and I”ll see how I can help out!
Alright, let’s discuss a few ways that you can get capital for your startup.
1. Prosper
Prosper is a peer to peer lending marketplace that will let you obtain an unsecured personal loan between $2,000 – $35,000 that can be used for business expenses. You are personally liable for the debt and the loans are not guaranteed by the SBA.
Peer to peer lending is a growing marketplace and readers have had a positive experience with the company. One reader we just interviewed had this to say:
“I’m a very loyal and loving fan of Prosper and their grassroots model. They have integrated a platform to put more power in the hands of small mom and pop businesses, as well as individual investors…My third loan for $15,000 was funded in 7 HOURS!” – See the review.
2. SBA Loans
SBA loans come with a guarantee for a portion of the overall loan, meaning that the SBA (Small Business Administration) will repay a certain amount of your loan to the lender if you default on the loan.
You can learn more about SBA loans through a local lender or bank that participates in the program. There are two main types of loans that I think you’d be interested in:
- 7(a) Loan Program: These loans are for borrowers that are starting, acquiring and expanding a small business.
- Microloan Program: These are smaller startup business loans for less than $50,000, with the average loan amount being $13,000.
The SBA loan program can be a great option if you’re having trouble qualifying for a traditional bank loan, which I’ll talk about next.
3. Bank Loan
If you’re going to seek out a traditional bank loan, it’s first important to know that the bank is going to want to see:
- Your credit score
- Personal debt and income
- Business stats (years in business, cash flow)
- Have a well-structured business plan
- Collateral
Remember that all business is done on the basis of relationships. It’s a good idea to get to know several different loan officers at several different banks.
I’d also recommend asking your banker about other forms of loans if you are unable to quality for a business loan. You might be able to get a line of credit, secured loan, or a loan that is based on your receivables (upcoming payments by customers).
4. Lending Club
Lending club is another peer to peer lending marketplace that you can use to get an unsecured personal loan for business expenses.
A lot of borrowers will also use Lending Club to refinance credit card debt. Check out this statistic:
“71.17% of Lending Club borrowers report using their loans to refinance existing loans or pay off their credit cards.”
The main reason is because most borrowers get a better rate on Lending Club than through other financing avenues, like credit cards.
You can get a business loan or line of credit for up to $300,000 with an interest rate between 6% and 21%.
5. Upstart
Upstart is the third peer to peer lending company that I’d recommend looking into.
What I like about Upstart (aside from the fact that the founder is the same age I am) is that rather than just using your FICO score and years of credit, the company also uses your education background, area of study, and job history to assess whether or not you’d be a good candidate for a loan.
You can use the website to get a personal loan between $3,000 – $35,000. Like with other peer to peer lending platforms out there, there is no prepayment penalty.
