6 Ways to Finance Your Business

 April 30, 2018
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How Student Loan Hero Gets Paid

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Student Loan Hero Advertiser Disclosure

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If you dream of giving up the nine-to-five life and starting your own business, you’re not alone. According to the Ewing Marion Kauffman Foundation, the number of startups increased dramatically between 2014 and 2016.

However, bringing that dream to fruition can be expensive, and finding business financing can be difficult. It’s important to understand all your options so you can get your idea started.

6 business financing options

When it comes to financing, you need to consider your business’ stage of development, how much you want, your credit score, and if you’ll have ongoing financing needs. Once you have that information in place, you can choose one of the six forms of financing available.

1. Business loans

If you need money to expand your business, hire new staff, or buy new equipment, a business loan is a good place to start if you have an established company.

Business loans are excellent choices because they give you a layer of protection. If your company fails, the lender can only liquidate your business assets. They cannot touch your personal assets, and your credit score will remain intact. That benefit can be financially invaluable if your idea doesn’t work.

Most banks and credit unions offer loans. To apply for a business loan, make sure you complete the following steps:

  1. Create a business plan. Most business loan lenders will require you to submit a company plan that outlines your business structure, market strategy, competitive analysis, development plan, and financial information.
  2. Know how you’ll use the money. Many lenders will ask you to specify how you’ll use the money. Make sure you have a concrete plan for what you’ll buy or how it would help you expand your inventory.
  3. Collect documentation. Besides a business plan, you’ll also need to provide lenders with your personal and business tax returns, bank statements, and annual report or statement of finances.

Although business loans can help you finance your goals, you might have trouble getting one if your venture is in the early stages of development. In fact, you might find only lenders with high interest rates are willing to work with you at first. But these interest rates can be well into the double digits, causing your loan balance to grow over time.

If that’s the case for your situation, it might be worth exploring other options first.

2. Small Business Administration (SBA) loans

If your business is new, you might not be able to qualify for a business loan. Often, lenders require businesses to exist for several years before they’re eligible for loans. Instead, you might have better luck applying for an SBA loan.

The SBA works with banks, credit unions, and development organizations to offer low-rate loans to those starting a new business or running an existing one. The SBA guarantees a portion of the loan, reducing the risk for the lender. Because there’s less risk, banks and other financial institutions can offer lower rates.

Depending on your needs and the status of your business, SBA loans can range from $500 to $5.5 million in value. You can use the loan for fixed assets, such as office furniture or equipment, or working capital.

Each lender that offers SBA loans has their own eligibility requirements in terms of credit score and income. In general, you must meet the following criteria:

  • You run a for-profit business.

  • You do business in the U.S.

  • You’ve invested your own time or money into the company.

  • You cannot get financing from other lenders.

You can use the SBA’s lender match tool to find approved lenders near you.

3. Personal loans

If you don’t qualify for business loans or SBA loans, another option to consider is taking out a personal loan. Depending on your goals, you could borrow as much as $100,000.

Personal loans are often easier to get than other forms of debt. Some personal loan lenders will issue loans to borrowers with credit scores as low as 580. Plus, personal loans don’t usually require collateral, which means none of your assets — such as your home or business — are at risk.

Depending on your credit, you might even be able to get a loan at a low interest rate. Some lenders offer loans with interest rates as low as 4.99%.

However, there are some drawbacks to using a personal loan for a business. With a personal loan, you’re responsible for repaying the debt no matter what happens to your business. If your business enters bankruptcy, you’ll still need to keep up with the payments on your loan. When you fall behind, your personal credit can be damaged, and the lender can send you into collections.

If you have poor credit, you could still qualify for a loan. However, you could end up paying much higher interest rates.

For example, pretend you needed $50,000 for your business and you had an excellent credit score. You could qualify for a five-year loan at 4.99%. Over the repayment term, you’d pay back just $6,600 in interest.

However, you might only be able to get a loan at 35.00% interest if you have less-than-stellar credit. If you took out $50,000 at that interest rate and repaid it over five years, you’d pay back $56,471 in interest charges alone. The cost of your loan would more than double due to the higher interest rate.

You can use our personal loan calculator to estimate out how much you’d pay in interest.

4. Business credit cards

Using a credit card to fund your business can be a smart decision. If you need access to revolving credit, a credit card can be a better choice than a business or personal loan.

Using a business credit card rather than a personal one can also make your life easier at tax time. You can simply review your card statement for purchases and payments, without worrying about checking for personal expenses. In addition, a business credit card can help you establish your business’ credit history, making it easier to get a loan later on.

Some business credit cards offer rewards, such as cash back for your purchases, which can stretch your budget further. They might even have a zero-interest promotional period.

However, getting a credit card is only wise if you have good credit. Otherwise, you could get hit with expensive interest rates that can cause your balance to grow.

Another thing to keep in mind is that your card usage can affect your personal credit. Some card companies report your activity to credit reporting agencies, which can impact your credit score if you fall behind on your payments.

Worse, some companies will require you to sign a personal guarantee for the credit card. That means that you’ll be responsible for paying off the card balance even if your business fails. Unlike business loans or SBA loans, your credit card balance might not be dissolved when your company enters bankruptcy.

5. Angel investors

An angel investor is a wealthy individual who invests their money in businesses and startups. An angel investor can also supply more than just capital. They can offer business advice, connect you with suppliers or other investors, and even expand your client base. In return for a loan, the angel investor gets equity in the business, earns money from returns, or gets royalties from your products.

When seeking out an angel investor, it’s important to remember accepting a loan will often mean giving up at least some control of your business. In some cases, that can be worth it to get an experienced business advisor, but it can shift your company’s dynamic.

To find an angel investor, you can post your project on the Angel Investment Network.

6. Crowdfunding

If you need business financing but can’t get a loan or a credit card, don’t give up on your idea. You could get your business off the ground by crowdfunding.

It can be a powerful option. According to crowdfunding site Kickstarter, 15 million people have pledged over $3.7 billion to fund more than 143,000 projects since the site launched in 2009.

With crowdfunding, you use a site such as Kickstarter to post your idea and funding needs. You can share that post on social media to bring attention to your goals. Individuals contribute money — sometimes a few dollars, sometimes thousands of dollars — to support your project.

The money these people contribute isn’t a loan. Instead, they’re repaid for recognition. For example, you might thank those people on your website or send them a prototype of your product.

However, you shouldn’t depend solely on crowdfunding to get financing. There’s no guarantee that your post will attract attention or the funds you need. Plus, you only get the money backers pledged if you meet your funding goal. If you raise less than that amount, you cannot access the funds.

Starting a business

Becoming an entrepreneur can be exciting, but finding business financing can be challenging. By doing some research and choosing the best option for you, you can launch your business without risking your own money.

For more information, learn how to start a side business.

Interested in a personal loan?

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How Student Loan Hero Gets Paid

Student Loan Hero is compensated by companies on this site and this compensation may impact how and where offers appear on this site (such as the order). Student Loan Hero does not include all lenders, savings products, or loan options available in the marketplace.

Advertiser Disclosure

Student Loan Hero Advertiser Disclosure

Student Loan Hero is an advertising-supported comparison service. The site features products from our partners as well as institutions which are not advertising partners. While we make an effort to include the best deals available to the general public, we make no warranty that such information represents all available products.

How Student Loan Hero Gets Paid

How Student Loan Hero Gets Paid

Student Loan Hero is compensated by companies on this site and this compensation may impact how and where offers appear on this site (such as the order). Student Loan Hero does not include all lenders, savings products, or loan options available in the marketplace.

Advertiser Disclosure

Student Loan Hero Advertiser Disclosure

Student Loan Hero is an advertising-supported comparison service. The site features products from our partners as well as institutions which are not advertising partners. While we make an effort to include the best deals available to the general public, we make no warranty that such information represents all available products.

RATES (APR)loan amount
4.99% – 19.63%1 $5,000 to $100,000
4.37% – 35.99% $1,000 to $50,000
5.94% – 35.97%* $1,000 to $50,000
99.00% – 199.00%2 $500 to $4,000
5.99% – 24.99%3 $5,000 to $40,000
9.99% – 35.99%4 $2,000 to $36,500
compare rates on Lendingtree now
NMLS #1136: Terms & Conditions Apply
1 Includes AutoPay discount. Important Disclosures for SoFi.

SoFi Disclosures

For when we advertise static headline rates w/ all discount (i.e. autopay and money bundle) (NON PQ RATE):

Fixed rates from 4.99% APR to 19.63% APR include a 0.25% autopay discount and a 0.25% direct deposit discount. SoFi rate ranges are current as of 11/2/2021 and are subject to change based on market conditions and borrower eligibility. SoFi Personal Loans are not available to residents of MS. Additional state restrictions may apply. Your actual rate will be within the range of rates listed and will depend on the term you select, evaluation of your creditworthiness, income, and a variety of other factors. Lowest rates reserved for the most creditworthy borrowers. Autopay Discount: The SoFi 0.25% autopay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings, checking, or other account. The benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings, checking, or SoFi Money account. Autopay is not required to receive a loan from SoFi. Direct Deposit Discount: To qualify for an additional 0.25% APR direct deposit discount you must: (1) set up autopay with SoFi Money within 20 days of the funding of your loan, AND (2) setup payroll direct deposits of at least $1,000/mo to SoFi Money within 35 days of the funding of your loan. If you do not set up autopay with SoFi Money within 20 days of the funding of your loan, AND set up payroll direct deposits to SoFi Money within 35 days of the funding of your loan you will not be qualified for this additional 0.25% direct deposit discount. Once qualified, you will receive this additional 0.25% direct deposit discount during periods in which you have direct deposits of at least $1,000/mo turned on with your SoFi Money account.  This additional direct deposit discount will be lost during periods in which you have turned off direct deposits for your SoFi Money account. You are not required to enroll in autopay or direct deposits to receive a loan from SoFi. The Direct Deposit Rate Reduction excludes members from receiving the $100 SoFi Money® direct deposit promotional program. SoFi Money® is a cash management account, which is a brokerage product, offered by SoFi Securities LLC. Member FINRA/SIPC. Neither SoFi nor its affiliates are a bank. SoFi Money Debit Card issued by The Bancorp Bank.

For API partners when we return pre-qual offers only with all discounts (i.e. autopay and money bundle) plus direct payoff discount for those borrowers who select credit card payoff:

Fixed rates from 4.99% APR to 19.63% APR include a 0.25% autopay discount and a 0.25% direct deposit discount. SoFi rate ranges are current as of 11/2/2021 and are subject to change based on market conditions and borrower eligibility. SoFi Personal Loans are not available to residents of MS. Additional state restrictions may apply. Your actual rate will be within the range of rates listed and will depend on the term you select, evaluation of your creditworthiness, income, and a variety of other factors. Lowest rates reserved for the most creditworthy borrowers. The SoFi 0.25% autopay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings, checking, or SoFi Money account. The benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account. Autopay is not required to receive a loan from SoFi. Direct Deposit Discount: To qualify for an additional 0.25% APR direct deposit discount you must: (1) set up autopay with SoFi Money within 20 days of the funding of your loan, AND (2) setup payroll direct deposits of at least $1,000/mo to SoFi Money within 35 days of the funding of your loan. If you do not set up autopay with SoFi Money within 20 days of the funding of your loan, AND set up payroll direct deposits to SoFi Money within 35 days of the funding of your loan you will not be qualified for this additional 0.25% direct deposit discount. Once qualified, you will receive this additional 0.25% direct deposit discount during periods in which you have direct deposits of at least $1,000/mo turned on with your SoFi Money account.  This additional direct deposit discount will be lost during periods in which you have turned off direct deposits for your SoFi Money account. You are not required to enroll in autopay or direct deposits to receive a loan. The Direct Deposit Rate Reduction excludes members from receiving the $100 SoFi Money® direct deposit promotional program. SoFi Money® is a cash management account, which is a brokerage product, offered by SoFi Securities LLC. Member FINRA/SIPC.Neither SoFi nor its affiliates are a bank. SoFi Money Debit Card issued by The Bancorp Bank. If you selected credit card payoff as your loan purpose then your pre-qualified rate also includes a potential additional 0.25% Direct Pay discount. To secure this discount, you will need to select Direct Pay as an option to pay off your credit card and apply 50% or more of your loan proceeds directly to your creditors.

2 Includes AutoPay discount. Important Disclosures for Opploans.

Opploans Disclosures

Direct Deposit required for payroll.

Opploans currently operates in these states: . *Approval may take longer if additional verification documents are requested. Not all loan requests are approved. Approval and loan terms vary based on credit determination and state law. Applications processed and approved before 7:30 p.m. ET Monday-Friday are typically funded the next business day.

  1. To qualify, a borrower must (i) be a U.S. citizen or permanent resident; (ii) reside in a state where OppLoans operates; (iii) have direct deposit; (iv) meet income requirements; (v) be 18 years of age (19 in Alabama); and, (vi) meet verification standards.
  2. NV Residents: The use of high-interest loans services should be used for short-term financial needs only and not as a long-term financial solution. Customers with credit difficulties should seek credit counseling before entering into any loan transaction.

  3. OppLoans performs no credit checks through the three major credit bureaus Experian, Equifax, or TransUnion. Applicants’ credit scores are provided by Clarity Services, Inc., a credit reporting agency.

  4. Based on customer service ratings on Google and Facebook. Testimonials reflect the individual’s opinion and may not be illustrative of all individual experiences with OppLoans. Check loan reviews.

  5. Rates and terms vary by state.

3 Includes AutoPay discount. Important Disclosures for Payoff.

Payoff Disclosures

  1. All loans are subject to credit review and approval. Your actual rate depends upon credit score, loan amount, loan term, credit usage and history. Currently loans are not offered in: MA, MS, NE, NV, OH, and WV.
4 Important Disclosures for LendingPoint.

LendingPoint Disclosures

  • Loan approval is not guaranteed. Actual loan offers and loan amounts, terms and annual percentage rates (“APR”) may vary based upon LendingPoint’s proprietary scoring and underwriting system’s review of your credit, financial condition, other factors, and supporting documents or information you provide. Origination or other fees from 0% to 6% may apply depending upon your state of residence. Upon LendingPoint’s final underwriting approval to fund a loan, said funds are often sent via ACH the next non-holiday business day. LendingPoint makes loan offers from $2,000 to $36,500, at rates ranging from a low of 9.99% APR to a high of 35.99% APR, with terms from 24 to 48 months. The loan offer(s) shown reflect a 28 day payment cycle which is being offered as a courtesy as many of our customers are paid on a biweekly schedule and thus this may better align the loan payment dates with your actual income receipt schedule.
* Important Disclosures for Upgrade Bank.

Upgrade Bank Disclosures

Personal loans made through Upgrade feature APRs of 5.94%-35.97%. All personal loans have a 2.9% to 8% origination fee, which is deducted from the loan proceeds. Lowest rates require Autopay and paying off a portion of existing debt directly. For example, if you receive a $10,000 loan with a 36-month term and a 17.98% APR (which includes a 14.32% yearly interest rate and a 5% one-time origination fee), you would receive $9,500 in your account and would have a required monthly payment of $343.33. Over the life of the loan, your payments would total $12,359.97. The APR on your loan may be higher or lower and your loan offers may not have multiple term lengths available. Actual rate depends on credit score, credit usage history, loan term, and other factors. Late payments or subsequent charges and fees may increase the cost of your fixed rate loan. There is no fee or penalty for repaying a loan early. Accept your loan offer and your funds will be sent to your bank or designated account within one (1) business day of clearing necessary verifications. Availability of the funds is dependent on how quickly your bank processes the transaction. From the time of approval, funds should be available within four (4) business days. Funds sent directly to pay off your creditors may take up to 2 weeks to clear, depending on the creditor. Personal loans issued by Upgrade’s lending partners. Information on Upgrade’s lending partners can be found at https://www.upgrade.com/lending-partners/.