Maybe you’re retired but restless and looking for something new to do; maybe you’re still excited to work, but pivoting careers later in life; or, maybe you have a great business that you’re thrilled to grow. Whatever the motivation behind running a business as a senior citizen, you have an exciting opportunity to do something rewarding for yourself. You might need capital to start or grow your business, and, luckily, there are great options for business loans for senior citizens.
We’ll review the top business loan options for senior citizens so you have a good sense of your options for getting capital. You’ll choose a loan type based on how quickly you need access to financing, what your financial history is, and why you’re using the capital. We’ll review all of these as we go through each loan type. We’ll also talk about some business fundamentals—including why you might even have better resources later in life.
What to Know About Business as a Senior Citizen
As a senior citizen, there are lots of things you should be thinking about as you start or grow a business. Some apply to every business owner, but there are some special considerations you should know as you begin your business as an older adult. And don’t fret—you have advantages!
1. Not every business needs to be big.
With all of the large businesses around, it’s hard not to be tempted to want to start something that makes a huge splash or want to grow your existing business into a nationwide brand. But small businesses—including ones that have a single storefront or serve a local community—can have a big impact, too.
2. Tap into your network.
There’s a good chance that over the course of the years, you’ve met a lot of people: friends and colleagues alike. Think about the people you know in your network, whether that’s for advice, promotion, or something else. There’s a good chance that someone in your circle can give you crucial help as you build your business. Don’t hesitate to ask.
3. Some businesses are far more capital-intensive than others.
It’s one thing to build, say, a digital consulting business out of your home in which you don’t have many overhead costs. But say you want to do something with a retail space, like starting a consignment store, for instance. Give a thought to the capital needs you have that are unique to the type of business that you’re running.
4. Picking the right financing is crucial.
If you need capital to fund your business, it’s important to pick the right business loan for senior citizens. Consider how much capital you need, how quickly you need it, and what your financial history and business track record is to find the right match for you. And although you might have access to lots of capital, only borrow what you need.
The Best Business Loans for Senior Citizens and Older Adults
There are lots of types of business loans for senior citizens that you should know about and consider when deciding how to finance your business. Here are some of the top options, which cover a variety of scenarios for which you might need capital, as well as financial situations for applicants.
The first type of loan to consider is an SBA loan. These loans are guaranteed by the Small Business Administration, which enables lenders—usually banks—to keep interest rates low and offer strong repayment terms. As you might expect, these favorable terms make these loans very competitive, but if you have a strong track record as a business owner, you could be a great candidate.
The main loan you’ll likely want to look into is the SBA 7(a) loan. This is actually the most popular loan in the SBA program since it provides flexible working capital for business owners. These can be dispersed as a term loan—what you likely think of as a “traditional” business loan, or a line of credit (more on that to come).
One important thing to know about SBA loans is that they take a bit of time to both apply for and receive. Consider a timeline of about two to three months as well as the time it’ll take to put together the lengthy application. Alternatively, you can consider what’s called an SBA Express loan, which provides a lower capital amount but enables qualified candidates faster approval.
Business Term Loans
If you like the idea of a term loan through the SBA, but don’t quite have the strong financials or the time in business required, you might want to consider a business term loan through an online lender. This kind of loan is likely what you think of when you envision a business loan: a lump sum deposited into your business bank account that you pay back over a period of time, often monthly. Terms are usually from 18 months to five years.
There are lots of reasons why a term loan could be a good fit, including that qualification requirements are more forgiving than SBA loans. Plus, business term loans for senior citizens are quite a bit faster, both in application and time to financing. You could potentially get a decision in a single day.
Business Line of Credit
A very popular type of business financing for senior citizens is a business line of credit. You can apply for a business line of credit through a lender that, if approved, will grant you with a capital amount to which you have access.
The biggest difference with this type of business loan is that you don’t receive the capital in a lump sum like in a term loan. Instead, you “draw” against your credit line, withdrawing only as much as you need. And the best part of this is that you only pay interest on what you use.
A business line of credit is also a highly flexible loan. Entrepreneurs use these loans for a variety of reasons: cash flow, investments, and emergencies alike.
Similar to term loans through online lenders, business lines of credit enable business owners with more varied qualifications to access capital. Some lenders will even approve owners with as few as six months in business. They’re fast to financing, too—sometimes, even overnight.
Business Credit Card
You might not think of a business credit card as an effective financing tool, but you might be surprised at how useful they can be. Specifically, you’ll want to look into 0% introductory APR business credit cards, which provide you a period during which you can spend on your card without incurring interest. Many of these periods, which are set by the card companies, are surprisingly long—even as long as a year.
You can use a business credit card to finance some of the day-to-day things that you need to get done. And, you can even start accruing points or cash back as a bonus. A range of business owners with varying financial histories can apply for business credit cards, and you often can find out if you are approved within minutes.
Though it can be risky to finance your business with retirement savings, such as your 401(k) or IRA, this can be a viable alternative for some—especially those who don’t want to take out a loan from a business lender. This can be especially viable for seniors who’ve saved a lot over the years.
There are a few things to consider before you reach into your retirement accounts, however. Before you do so, make sure you speak with your accountant about any potential withdrawal penalties. You can also read up to get a better basis from which to decide: Start with our guide for financing a business with your 401(k).
Documentation for Business Loan Applications
Business loan applications for senior citizens aren’t hard to put together—some are just more time-consuming than others. And, although lenders will ask for specific documentation depending on their own requirements, there are documents that you can gather in advance. The more effort you put into getting your documentation together, the faster your approval process may be.
SBA Loan Applications
We’re breaking out SBA loans as their own category within business loan applications. That’s because these applications are much different; chiefly, they require a lot of special documentation that’s proprietary to the SBA.
This lengthy SBA application is one of the reasons that these loans take so long to apply for—often, lenders will come back to you and ask for more documentation and forms before they can submit and process your application. But, as you likely know, it’s worth the time and effort if you can meet the requirements.
Other Business Loan Applications
In general, many other types of business loans will ask for similar documentation. It’s a good idea to prepare this documentation in advance to move the application process along. Within your own records and documentation, you’ll want to pull the following:
- Two years of business tax returns
- Two years of personal tax returns
- Three to four months of business bank statements
- Profit and loss statement
- Balance sheet
- Personal identification
Choosing the Right Business Loan for Senior Citizens
Choosing the right business loan for your company doesn’t have to be difficult, as long as you understand your options. Make sure that you’re well aware of your needs and history, how quickly you need the money, what you’re using it for, and your credit profile. Having this information will help you decide which loan options are the most feasible for you.
If you’re not sure where to start, or what loans would be the right fit for you, Fundera can help you explore all of your business loan options. With our free online marketplace, you can easily compare your options, and figure out which small business loan is right for you.