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Best Business Loans Depending on Your Growth Stage

Georgia McIntyre

Georgia McIntyre

Finance Writer at Fundera
Georgia McIntyre is the resident Finance Writer at Fundera. She specializes in all things small business finance, from lending to accounting. Questions for Georgia? Comment below!
Georgia McIntyre

No matter what stage of growth your business is in, it’s likely that at some point or another you’ll need to seek financing to grow or keep your business afloat.

But what are the best business loans for different growth stages?

Truthfully, the best financing for your business depends on what your needs are and what your business qualifies for. However, there are generally some loans that are more ideal for certain growth stages than others.

So what are they and what can a small business owner expect to qualify for?

Let’s explore below.

Startups

Let’s consider “startups” to be businesses that are just starting out—maybe only weeks or a few months old.

It’s tough for a startup to qualify for most loans, but they still have options—and those options will rely heavily on the business owner’s personal credit history and qualifications.

The best:

  • SBA Microloans: The Small Business Administration’s only startup friendly loan program and the only loan program that isn’t administered through a bank but through nonprofit community-based intermediaries.

The maximum loan amount is around $35,000 and terms vary depending on your qualifications.

Other options?

  • Startup loans: This is a type of loan with the express purpose of helping businesses with little to no financial history. These have low loan amounts, shorter repayment periods, and higher rates. Most are offered primarily by online lenders.
  • Business credit cards: One way to ensure that your startup can secure good financing down the line is to build up its credit score from the very beginning. Plus, securing a business credit card often means the business owner’s personal credit score is considered when deliberating approval.

As a new business owner, you should be particularly interested in 0% intro APR cards—which work much like a zero interest loan (as long as you pay back your balance before the promo period is over).

best-business-loans-growth-stage

Early Stage Businesses

Early stage businesses are businesses that are less than 2 years old. Most long-term loans require that businesses be in existence for more than two years, so options for early stage businesses are more limited, with higher interest rates and less favorable terms.

The best:

  • Short-term loans: Gives you a lump sum of cash to repay between 3 to 18 months. Loan amounts typically range between $2,500-$250,000 and can be obtained primarily through online lenders.  
  • Business lines of creditWorks a lot like credit cards, only you have easier access to actual cash—making it easier to use for things like making payroll.

This is a slightly more flexible option than a short-term loan. The benefit is that you only have to repay what you spend on your credit line, as opposed to a hard lump sum.

Other options?

  • Invoice financing: Lets you use your business’s unpaid invoices as collateral for securing a loan.

A lender will loan your business the amount you are owed in invoices, and then accept repayment once that invoice is paid—for a fee.

This is a good option for early stage businesses who are struggling with cash flow due to unpaid invoices.

Established Businesses

Established businesses have been around for more than 2 years and have a relatively healthy financial history—making it easier to qualify for some of the tougher to qualify for loan products.

The best:

  • Long-term loans: If you need a high dollar amount with low rates and long repayment periods, then you are looking for a long-term loan. They are typically provided by banks, but some online lenders also offer long-term loan products.

You need to have at least a 600 credit score $90,000 in annual revenue.

  • Small Business Administration loans: The most sought-after term loans are the SBA-guaranteed term loans that reduce risk for the lender, thus lowering the interest rates and overall cost of loans.

They’re also the toughest to qualify for—requiring an estimated 620+ credit score and at least $100,000 in annual revenue. But it’s worth it if you can get it.

Other options?

  • Equipment loans: If you have a specific piece of equipment in mind for your established business, you might consider an equipment loan.

Equipment loans have low rates because they use the equipment purchased with the funds as collateral for the loan. They’ll allow long repayment periods for healthy, established businesses.

best-business-loans-growth-stage

Stagnant Businesses

Stagnant businesses have been around for more than two years but have experienced sluggish or dormant financial growth.

The best:

  • Term loans: It might be possible for a stagnant business to secure a coveted term loan, but they need to have a solid business plan for moving forward.

They also have to convince lenders they won’t just dive into the red.

That said, it may be easier to try financing options with fewer qualification requirements or strings attached.

Other options?

  • Line of credit: Open up your cash flow or make smart purchases that can induce growth.
  • Invoice financing: Don’t let unpaid invoices keep your business down. If your business is stagnating because you’re waiting for other people to pay what they owe you, invoice financing may be a great option.  

Businesses in Decline

A declining business is one that is struggling to stay afloat. It may be in a lot of debt already or experiencing severe cash flow issues.

It can be difficult for a declining business to secure financing, but if a small business owner is passionate about keeping the business going, they still have options.

It will truly depend on many factors as to what the best loan option will be for your business, but these may help:

  • Refinancing: If you’re already in a lot of debt, you’ll want to consider refinancing your existing debt to get your repayment plan in the best shape it possibly can be before seeking other types of financing.

It may even be all you need to pull your business out of decline.

  • Short-term loan: If you are able to take on new debt, short-term loans are relatively easy to qualify for compared to other lump sum financing. Just make sure you have a solid plan for how to use the influx of cash so that you’re not stuck with a loan you can’t repay.

***

No matter what stage of growth your business is going through—from just starting up to experiencing major growth or decline— there are financing options available.

Factors like your time in business, annual revenue, and personal or business credit are the greatest indicators in terms of which financing options you can qualify for.

Check out our post on the best small business loans depending on your credit score to explore even more financing options depending on the state of your credit.

Editorial Note: Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and have not been reviewed, approved, or otherwise endorsed by any of these entities.
Georgia McIntyre

Georgia McIntyre

Finance Writer at Fundera
Georgia McIntyre is the resident Finance Writer at Fundera. She specializes in all things small business finance, from lending to accounting. Questions for Georgia? Comment below!
Georgia McIntyre

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