Whether you're financing new equipment or simply need some additional working capital, chances are that at some point you'll need outside money to grow or maintain your small business. Once you've decided what type of loan makes the most sense for you, you'll want to compare different lending options.
- Big banks: Big banks are "the lender you know." While the interest rates and payment terms for a bank loan are typically more favorable, your business may need to meet rigorous standards for approval.
- Community banks and credit unions: These financial institutions are often very willing to work with small businesses and tend to have higher approval rates than big banks.
- Alternative financing companies: Outside of the banking industry, peer-to-peer lending platforms, short-term lenders, merchant cash advances, crowdfunding sites, and purchase order financiers, all offer options for small businesses to find financing. Many of these lenders offer speedy approval times, but interest rates are typically higher than those of traditional lenders.
- Nonprofit microlenders: These lenders may be part of community development organizations and typically offer terms and interest rates that are very favorable for small loan amounts.
- Small Business Administration (SBA): The SBA isn't a lender, but backs loans offered through a variety of banks and microlenders. SBA-backed loans are easier to secure than traditional bank loans, but still have tough eligibility requirements and long applications.