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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.
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 maximum loan amount is around $35,000 and terms vary depending on your qualifications.
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).
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.
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.
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 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.
You need to have at least a 600 credit score $90,000 in annual revenue.
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.
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.
Stagnant businesses have been around for more than two years but have experienced sluggish or dormant financial growth.
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.
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:
It may even be all you need to pull your business out of decline.
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.