Sometimes, you just need to borrow a small amount of money for your business for things like buying extra inventory, doing some extra advertising, or updating your website. Banks usually won’t spend time to process paperwork for such small loans. A lot of business owners ask family or friends for small loans, but if you don’t feel like asking for help, here are 5 ways to borrow $5000 or less for your business.
1. Get a Short-Term Business Loan
If your credit score is decent and you’ve been in business for at least several months with stable or growing revenue, you should be able to get a $5000 loan pretty fast from a short-term business lender. OnDeck is the most popular of the short-term lenders, but you have a lot of options here. A lot of lending companies are popping up in this area to meet the demand for fast, smaller size loans, a need that banks don’t serve very well.
Depending on the lender, you can borrow as little as $2,000 and as much as $250,000.
Most of these short-term lenders have a lightning fast online application system. They can approve your loan application on the same day that you apply, and you’ll have the money in your account a couple days after approval.
The downside is that these types of loans can be expensive, with Annual Percentage Interest Rates (APR) often ranging from 40 % to 85 %. But that may be a price you’re willing to pay for fast access to money for your business.
2. Get a Peer to Peer Loan
Peer to Peer (P2P)loans are a recent trend in the personal and business loan industry. As the name implies, P2P companies enable people to borrow and lend to each other . Lending Club and Prosper are two companies in this space.
A $5,000 loan on Lending Club or Prosper will be a personal loan, not a business loan. What’s the difference? Both personal and business loans can be used as working capital for your business. Personal loans are usually easier to qualify for and are used to borrow small amounts of money. However, your loan approval and interest rate will be based on your personal finances rather than those of your business. The interest rates are similar for both types of loans.
Once you submit your loan application online, investors mull over the business information you provide and decide if they want to loan you money. You do have to provide your credit score here. The APR can vary anywhere from 6 % to 30 %; it really depends on how risky you look as a borrower.
3. Harness Your Online Sales
PayPal is known for being a payment processor, but they also have a loan program for sellers. If you’re a PayPal merchant, you can get a $5000 loan from PayPal Working Capital. They will typically lend you 4 % to 12 % of your business’ annual PayPal sales, so to borrow $5000, you should make at least $40,000 in annual PayPal sales.
The application, approval, and funding process are really fast. There’s no credit check, and you’ll be instantly approved based on your PayPal sales history. If you are approved, the funds are instantly available in your PayPal account.
If you don’t sell on PayPal but are active on other online channels such as Amazon or Ebay, you have other options like Kabbage.
4. Sell Your Business Invoices
You may not have thought about it this way, but if you invoice a lot of customers for buying your goods or services, you’re sitting on cash. For a fee, some lenders will loan you money in exchange for unpaid invoices.
Fundbox is a modern take on invoice factoring. They will advance you $100 to $25,000 for unpaid invoices and charge fees of around 5 % to 7 % of your loan amount (this is relatively low for an invoice factoring company). You don’t need a minimum credit score or minimum business revenues to qualify for a Fundbox loan.
Invoice factors get a bad rap for being expensive, but there are good things about them too. For one thing, they help you bridge cash flow problems. They also don’t ask you to personally guarantee the loan or provide collateral for it, so you don’t have to worry about losing your business assets or personal assets in case you can’t pay back the loan.
5. Try Purchase Financing
One last tip for borrowing $5,000 is to try purchase financing if you need to buy essential goods or services for your business. Behalf has a unique outlook on purchase financing. Say Susie of Susie’s Cupcakes wants to buy a brand new $5000 commercial grade oven from Owen’s Ovens but doesn’t have the money. Behalf will pay Owen’s Ovens the $5,000 and let Susie pay back Behalf in installments over 4 months. Susie is happy because she gets her oven, and Owen is happy because he gets paid the full amount right away without having to worry about loaning Susie money.
Behalf works like a line of credit. If Susie pays off $3000 for the oven she purchased, that amount is available to her again to buy other things she may need for her cupcake business.
Behalf does not perform a credit check, and the application and funding process is very quick, but it can be expensive. Behalf charges 1 % to 3 % interest for every month that you borrow money.
If you get creative, there are quite a few options for borrowing that $5,000 you need to jump start your business. Our advice is to think about how you do business (e.g. online, by invoicing, regular purchases, etc.) and leverage that when looking for a loan.
Photo Credit: Pictures of Money/Creative Commons
If your credit score is decent and you’ve been in business for at least several months with stable or growing revenue, you should be able to get a $5000 loan pretty fast from a short-term business lender. OnDeck is the most popular of the short-term lenders, but you have a lot of options here. A lot of lending companies are popping up in this area to meet the demand for fast, smaller size loans, a need that banks don’t serve very well.
Depending on the lender, you can borrow as little as $2,000 and as much as $250,000.
Most of these short-term lenders have a lightning fast online application system. They can approve your loan application on the same day that you apply, and you’ll have the money in your account a couple days after approval.
The downside is that these types of loans can be expensive, with Annual Percentage Interest Rates (APR) often ranging from 40 % to 85 %. But that may be a price you’re willing to pay for fast access to money for your business.
2. Get a Peer to Peer Loan
Peer to Peer (P2P)loans are a recent trend in the personal and business loan industry. As the name implies, P2P companies enable people to borrow and lend to each other . Lending Club and Prosper are two companies in this space.
A $5,000 loan on Lending Club or Prosper will be a personal loan, not a business loan. What’s the difference? Both personal and business loans can be used as working capital for your business. Personal loans are usually easier to qualify for and are used to borrow small amounts of money. However, your loan approval and interest rate will be based on your personal finances rather than those of your business. The interest rates are similar for both types of loans.
Once you submit your loan application online, investors mull over the business information you provide and decide if they want to loan you money. You do have to provide your credit score here. The APR can vary anywhere from 6 % to 30 %; it really depends on how risky you look as a borrower.
3. Harness Your Online Sales
PayPal is known for being a payment processor, but they also have a loan program for sellers. If you’re a PayPal merchant, you can get a $5000 loan from PayPal Working Capital. They will typically lend you 4 % to 12 % of your business’ annual PayPal sales, so to borrow $5000, you should make at least $40,000 in annual PayPal sales.
The application, approval, and funding process are really fast. There’s no credit check, and you’ll be instantly approved based on your PayPal sales history. If you are approved, the funds are instantly available in your PayPal account.
If you don’t sell on PayPal but are active on other online channels such as Amazon or Ebay, you have other options like Kabbage.
4. Sell Your Business Invoices
You may not have thought about it this way, but if you invoice a lot of customers for buying your goods or services, you’re sitting on cash. For a fee, some lenders will loan you money in exchange for unpaid invoices.
Fundbox is a modern take on invoice factoring. They will advance you $100 to $25,000 for unpaid invoices and charge fees of around 5 % to 7 % of your loan amount (this is relatively low for an invoice factoring company). You don’t need a minimum credit score or minimum business revenues to qualify for a Fundbox loan.
Invoice factors get a bad rap for being expensive, but there are good things about them too. For one thing, they help you bridge cash flow problems. They also don’t ask you to personally guarantee the loan or provide collateral for it, so you don’t have to worry about losing your business assets or personal assets in case you can’t pay back the loan.
5. Try Purchase Financing
One last tip for borrowing $5,000 is to try purchase financing if you need to buy essential goods or services for your business. Behalf has a unique outlook on purchase financing. Say Susie of Susie’s Cupcakes wants to buy a brand new $5000 commercial grade oven from Owen’s Ovens but doesn’t have the money. Behalf will pay Owen’s Ovens the $5,000 and let Susie pay back Behalf in installments over 4 months. Susie is happy because she gets her oven, and Owen is happy because he gets paid the full amount right away without having to worry about loaning Susie money.
Behalf works like a line of credit. If Susie pays off $3000 for the oven she purchased, that amount is available to her again to buy other things she may need for her cupcake business.
Behalf does not perform a credit check, and the application and funding process is very quick, but it can be expensive. Behalf charges 1 % to 3 % interest for every month that you borrow money.
If you get creative, there are quite a few options for borrowing that $5,000 you need to jump start your business. Our advice is to think about how you do business (e.g. online, by invoicing, regular purchases, etc.) and leverage that when looking for a loan.
Photo Credit: Pictures of Money/Creative Commons
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Priyanka Prakash Priyanka is a member of the editorial team of Fit Small Business. Prior to joining Fit Small Business, she served as general counsel of a startup in San Francisco.
