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3 Ways to Borrow Money For a Small Business

Borrowing money is a regular part of running a small business. Whether you're trying to prepare for your grand opening or expand your operations, financing is often how big ideas turn into profitable ones.

The National Small Business Association says 73% of small firms use financing over the course of a year.1 And because small business owners tend to be creative thinkers, they're great at finding different ways to access funds. Here are a few of the most common ways small businesses borrow money, and how you can get access to these funds too.

1. Bank loans

Need more than $50,000? A lot of businesses do. A traditional loan is one way to access that level of financing. They're available from most banks and credit unions, and lenders require applicants to meet certain qualifications to prove their creditworthiness. Because of those requirements, traditional business loans from banks are often a good fit for established small businesses, or those starting out with some significant assets.

How to get a bank loan: Small businesses can apply for bank loans through commercial banks, community lenders, and credit unions. They'll need to have a few things:

  • An established credit history for the business
  • A good business credit score
  • A business plan
  • Some sort of collateral (like a building, vehicle, or inventory) to secure the loan
  • A good personal credit history, as it can be factored into the business loan application
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SBA loans are great for small businesses because they're backed in full or in part by the federal government, making them less risky for lenders.

2. SBA loans

Financing options from the U.S. Small Business Administration (SBA) include loans and lines of credit. SBA loans are popular because they're backed in full or in part by the federal government, making them less risky for lenders. This means small businesses that haven't been able to qualify for a traditional business loan can often be approved. It can also mean better terms, like low down payments, and sometimes no collateral required. Some SBA loan programs include helpful financial counseling and education programs. The SBA offers several financing products, including loans for expansion projects, working capital, exports, and international trade.

Microloans are also an option for new businesses without the financial history to qualify for a traditional loan. Because these loans are offered in lower amounts, the requirements to qualify are often lower too. The U.S. Small Business Administration offers microloans up to $50,000, but $13,000 is their average microloan amount.2 Many nonprofits offer microloans to small businesses from under served groups, such as minority- or woman-owned firms and those in low-income communities.

How to get an SBA loan: Many commercial lenders offer SBA loans. You can visit the SBA loan website to find a lending partner and research the best SBA loan type for you. In some cases, to qualify for an SBA loan, you must have tried, unsuccessfully, to borrow money from other sources. Talk with your lender for details.3

How to get a microloan: Microloan lenders vary widely in terms of qualifications, so start by finding the best microlender for your small business. If your business is minority- or woman-owned, search for a nonprofit lender that serves you. And be sure to check out the SBA's microloan program.2

3. Business lines of credit

A line of credit offers small businesses some of the benefits of a loan and credit card in one. Unlike a loan, a business line of credit can be used for anything, and some are unsecured too — meaning they don't require collateral. They also have a higher approval rate than business bank loans.4 They function similarly to a credit card in that you have a credit limit, and you only use as much money as you need at any given time. Interest rates for lines of credit are often lower than those credit cards offer. Like a credit card, though, you only pay interest on the money you actually borrow on the line of credit.

How to get a business line of credit: Commercial banks and online lenders offer lines of credit to small businesses. Shop around for the best terms. Many lenders offer online applications, but be prepared to supply financial statements, tax information, balance sheets, and other documentation when you apply.

Taking the next step

Interested in borrowing money for your small business? Synovus is an SBA Preferred Lender, and we're committed to helping small business owners achieve their goals. Stop by your local branch to talk with a banker about how Synovus can help you take your small business to the next level.

Important Disclosure Information

This content is general in nature and does not constitute legal, tax, accounting, financial or investment advice. You are encouraged to consult with competent legal, tax, accounting, financial or investment professionals based on your specific circumstances. We do not make any warranties as to accuracy or completeness of this information, do not endorse any third-party companies, products, or services described here, and take no liability for your use of this information.

  1. "Frequently Asked Questions about Small Business Finance, July 2016" U.S. Small Business Administration, accessed July 18, 2019. Back
  2. Loans & Grants, Microloan Program, U.S. Small Business Administration, accessed July 18, 2019. Back
  3. Loans, U.S. Small Business Administration, accessed July 18, 2019. Back
  4. "Report to the Congress on the Availability of Credit to Small Businesses, September 2017" Federal Reserve, accessed July 18, 2019. Back

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