Need to borrow money for your business? Here are 3 alternatives to business loans
Business loans are hard to come by, but they’re not your only option.
- You can use a personal loan for almost anything, including financing your small business.
- Business credit cards with a 0% introductory APR are also an affordable financing option.
- For homeowners, a home equity line of credit could be a convenient choice with a low interest rate.
When you own a business, there often comes a time when you need to borrow money to maximize growth. Although many lenders offer business loans, they usually have income and time spent on business needs that some businesses will struggle to meet. Even getting an SBA loan can be difficult for new businesses.
If business loans are out of the question, here are three other financing options that might work for your business.
1. Personal loans
A personal loan is one of the most flexible types of loans you can get. While most loans must be used for a specific purpose, a personal loan can be used for just about anything, including business expenses.
Another advantage of personal loans is that they are quite easy to obtain, especially if you have a high credit rating. Traditional banks, credit unions, and online banks all offer them, so you’ll have plenty of options. Loan amounts normally range from $1,000 to $100,000 or more, and depending on your credit, you may qualify for a low interest rate.
Interested in a personal loan? Check out The Ascent’s Best Personal Loans to find a lender.
2. Business credit cards with 0% introductory APR
A business credit card is a credit card designed for small business owners. Like other types of credit cards, it lets you pay for your expenses on credit and pay them back over time.
In most cases, credit cards are not a great choice for borrowing money. Since they usually have high interest rates, it’s best to pay off your card balance in full each month to avoid credit card interest charges. However, some cards have a special offer for a 0% introductory APR on purchases.
If a credit card has a 0% introductory APR on purchases, you can carry a balance without interest charges until the end of the introductory period. Some business credit cards offer this for 12 months, meaning you’d have a full year of interest-free financing. Just keep in mind that the APR of the credit card will increase a bit after this period ends. To avoid a big bill, pay off your full card balance during the introductory period.
Looking for a business credit card? Here are The Ascent’s top business credit card picks.
3. Home Equity Line of Credit
A home equity line of credit (HELOC) allows you to borrow against the equity in your home. Let’s say you have a $300,000 house with $150,000 remaining on the mortgage. A lender would probably allow you to use that $150,000 of home equity to get a line of credit up to a certain amount, such as $75,000, depending on that lender’s limits.
This option is not available to everyone, as it requires you to have the equity in your home. There are also more risks involved. You need to be sure that you can repay what you borrow, because your house serves as collateral.
Despite the risk, HELOCs can be a great borrowing option. You can use as much or as little of your line of credit as you want, and you can borrow again after making payments on it. Interest rates are also normally lower than other types of debt.
Want to get a HELOC? See The Ascent’s top HELOC lenders.
There are many ways to borrow money for your business outside of the traditional business loan route. Depending on your financial situation, a personal loan, business credit card, or HELOC could all be convenient options with low interest rates.
Expert-selected business credit cards with rich rewards and benefits
Cash back, travel rewards, 0% introductory APR financing—all of these can be great credit card perks for business owners. But how do you find the right business credit card for you? There are tons of offers on the market today, and sifting through them to find the right one can be a big hassle. So we’ve done the hard work for you.
Get started today with one of our best business credit cards of 2022.