The Small Business Administration (SBA) is a popular option when it comes to small business financing. But while these loans can help small business owners access significant funding, they’re not always the right fit. SBA loans often come with a long list of requirements, including being unable to obtain all other types of financing, and an intensive application process. If you have a limited business credit history, struggle to meet the SBA’s other requirements, or need funds quickly, alternatives to SBA loans may better provide the support you need.

Some alternatives to SBA loans include traditional banks or credit unions, online lenders, non-profits, and private lenders. Banks and credit unions may offer competitive terms and rates, but requirements could be similarly steep. Direct online and private lenders typically have more flexibility. They may also offer a more streamlined application process with less documentation required, so you can get the money you need sooner. These alternative lenders may also offer many different small business loan options.  

Loan Options that Aren’t SBA Loans

Traditional Business Term Loans

Most lenders offer term loans, which work like standard installment loans. Borrowers receive a lump sum upfront. They repay that amount, plus interest that accrues at a fixed rate, over a timeframe they’ve already established with the lender. Some term loans may require collateral, but it’s not always necessary. This financing option is typically a good fit for specific projects or equipment purchases, where you may already know approximately how much money you’ll need.

Because installment payment amounts and timeframes typically remain the same until the loan is repaid, term loans could be incorporated easily into your business budget. Online and private lenders may offer more individualized terms than SBA loans. However, borrowers owe interest on the full loan amount.

Traditional Microloans

Microloans, as their name suggests, are small business loans meant to help launch or expand certain businesses. Microlenders often focus on specific populations who may face barriers to business ownership or who are underrepresented in the business world. Lenders may also operate within underserved communities to help foster a healthy local economy.

Microloans often come with lower interest rates to make them more accessible than larger term loans. Non-profit organizations and government agencies may offer microloans, as well as more traditional lenders like credit unions. These smaller loans may be useful for starting a new business, covering a specific expense (like a down payment on a storefront), or financing some operational needs.  

Business Line of Credit

Business lines of credit are often more flexible financing tools than term loans. They’re a form of revolving credit, so borrowers are approved for a credit limit, not a total loan amount. Throughout a line of credit’s term, borrowers can tap into it as needed within that limit. As you repay what you’ve borrowed, you restore your credit limit, which allows you to draw funds again.

Like term loans, business lines of credit accrue interest. Interest rates may be fixed or variable, meaning they could change with market conditions. But borrowers only owe interest on the portion of their credit lines they use. Every lender is different, but typically, lines of credit don’t provide access to as much funding as term loans. However, they often have fewer requirements, so they’re easier to access in a pinch. When used responsibly, business lines of credit could help address cash flow issues and cover other expenses as needed.  

Other Types of Small Business Financing

Aside from loans, small businesses have access to various financing options that can offer flexibility and unique advantages based on their specific situation and goals.

  • Business Credit Cards: Business credit cards provide a revolving line of credit, similar to a business line of credit, for expenses like supplies, travel, and daily operations. They often come with rewards programs and expense tracking tools, making them convenient for managing finances.
  • Equipment Financing: Designed for acquiring equipment like machinery, vehicles, or technology, equipment financing uses the equipment itself as collateral.
  • Invoice Financing: Also known as accounts receivable financing, this option involves selling unpaid invoices to a factoring company at a discount, providing immediate cash flow by converting invoices into working capital.
  • Crowdfunding: Platforms like Kickstarter and GoFundMe allow businesses to raise funds from many people in exchange for rewards, pre-orders, or equity, helping validate ideas and generate revenue.
  • Grants: Offered by government agencies and non-profits for specific purposes such as research, community projects, or environmental initiatives, grants do not require repayment but may have strict eligibility criteria. Grants are usually incredibly competitive, too.

Where to Find Small Business Loans

Small business loans can be found through various sources, including traditional financial institutions such as banks and credit unions or through online lenders. Each lender offers different loans, terms, and rates, so compare your options to find the best fit for your business.