A business loan can often be a necessary tool to help with specific financial needs. Whether you’re looking to purchase inventory, make repairs, handle unexpected costs, or expand your business, there will come a time when your business needs financing. The problem is that not every business owner qualifies for a business loan.
If your business has not yet established a credit history or is not bringing in substantial revenue, you may find it difficult to be approved for a loan. The good news is that there are alternative financing options out there that can help you get the money you need for your business.
Consider some of these alternatives to a business loan:
1. Business Credit Card
A business credit card is an exceptional tool because it gives you access to money your business can use as needed. Business credit cards are often easier to obtain than loans, and they do not require equity.
Here are some additional potential benefits of a business credit card:
- Can help your business establish credit. Using a business credit card responsibly and making payments on time can help you build credit in your business’s name. This can lead to confidence from future creditors, and increase your chances of being approved for a business loan down the road when you need to fund bigger projects.
- Allows you to earn cash back and other rewards. Some of the best credit card rewards programs today are available with business credit cards. Many cards offer rewards that can be redeemed for cash, airline miles, or other perks that fit your business objectives.
- Can help you keep track of your business expenses. With a business credit card, you can easily view all purchases on your credit card statements and access them online. This can make tracking expenses and charges easier to manage. Some business credit card providers also offer helpful money management and expense reporting tools.
2. Business Grants
Grants can be one of the best funding sources available to small businesses. Grants are essentially gifts or awards that do not have to be paid back. You should seek out and apply for any grants that your business qualifies for. Most grants will have stipulations or restrictions regarding how the money can be spent, but if you are awarded a grant it could be a great way to fund and grow your business.
A good resource for federal business grants is the US Small Business Administration. They offer business grants for things such as:
- Research and development
- Management and technical assistance
- Export development
- Entrepreneurship promotion
You can also find grants at the state and local level. The Massachusetts Executive Office of Economic Development provides resources on available grants, as does the Rhode Island Commerce website.
3. Crowdfunding
Another option available to small businesses is crowdfunding. Crowdfunding is a way for individuals to invest in, or contribute money to, a business’s specific goals or plans in return for a cut of profits or some other incentive. There are many crowdfunding options available online that can make it easy for a business to try out this form of funding.
It’s important to note however that crowdfunding is not free money. Typically, crowdfunding works similar to a loan, in that your business will need to pay back the funds, or offer some other type of incentive or payback to your crowdfunding investors. Crowdfunding can also be equity-based in some cases, meaning that the investors who contribute funds can gain ownership in your business. Before moving forward with a crowdfunding campaign, it’s extremely important to review all of the terms and fine print.
If your business needs funding and you’re not currently eligible for a business loan, it’s good to know that there are other financing options available. When reviewing alternative solutions such as business credit cards, grants, and crowdfunding it’s important to understand your exact financial needs to determine which option makes the most sense. If you are a Massachusetts or Rhode Island business owner in need of financing, don’t hesitate to contact our Business Banking team. We can help you determine your eligibility for traditional business loans, SBA loans, or lines of credit, or see if a business credit card or other solution might be a better fit.