4 Best Loan Options for a Newly Incorporated Business

Venture capital deals get all the headlines, like WeWork’s massive infusion of $6 billion in 2017. For most new businesses, obtaining VC funding isn’t really possible, though. And besides, depending on the type of business you’re running, you may not even need that level of funding.

Thankfully, the small business lending landscape has financing products specifically designed for newly incorporated businesses. Here are four great options you have to get the cash you need to propel your young company toward a bright future.

1. Equipment Financing

Equipment financing is a loan to purchase equipment you need for your company. Equipment includes everything from heavy machinery and kitchen equipment to cars and computers. Chances are your company requires some sort of equipment to operate.

Why is equipment financing good for new businesses?

With equipment financing, the equipment serves as collateral. This means your credit, annual revenue, and financial statements aren’t scrutinized as much. Additionally, since the value of equipment depreciates over time, you can use that depreciation of company assets as a tax benefit.

Interest rates typically range from 8–30%, depending on your credit and revenue. Those who get the most favorable rates tend to have a good credit score and about six figures in revenue. The loan term is the expected lifespan of the equipment. So, you can pay off the loan as the equipment helps you generate income for your business. The loan amount is up to the full cost of the equipment.

2. Business Credit Card

A business credit card functions much like a consumer credit card, allowing you access to revolving capital (your credit limit replenishes as you repay). The benefits are a higher credit limit and rewards and perks designed specifically for businesses.

Why is a business credit card good for new businesses?

There are a number of advantages, including:

  • The ability to separate your personal expenses from your business ones—something many new companies often mix up.
  • The ability to save money for your business by getting cash back, earning rewards, taking advantage of 0% intro APR offers, and capitalizing on sign-up bonuses. The best business credit cards come with lucrative sign-up offers, like bonus points, and can save you thousands each year.
  • The ability to manage and track spending using the card provider’s powerful finance tools.

Additionally, nearly every business can get approved for a business credit card, as there are cards for those with bad credit, like the Capital One Spark Classic for Business.

Business credit cards have limits up to as high as $100,000, offering you a solid cash cushion during your early days. Those that get the best rates generally have a credit score over 700 and more than $75,000 in annual revenue.

3. Credit Line Builder

With a credit line builder, you partner with a financing company who helps you apply for multiple business credit cards simultaneously. This removes a lot of legwork for you.

Why is a credit line builder good for new businesses?

With one credit card or line of credit, the amount of cash you have access to is limited. Your credit limit with a credit line builder is the combined amount of all the cards you get. It’s also a great tool for building business credit.

Your actual credit limit could easily exceed six figures. If you have a personal credit score of over 700 and revenue exceeding $75,000, you’ll get more favorable rates and terms from the financing company.

4. Personal Loan for Business

A personal loan is made to you personally, but can really be used any way you like. Money is given as a lump sum and expected to be paid back in monthly or bi-monthly installments.

Why is a personal loan good for new businesses?

Personal loans usually don’t have strict requirements and often are more affordable than even traditional business term loans. This is why it often makes sense to use a personal loan for business.

Typically, a high credit score is not required, though you’ll get better rates and terms the higher your score is. Loan terms tend to range from 3 to 5 years and generally can be for up to $35,000. Interest rates usually span from 5.99% to 36%.

Getting the best loan for your new business

These four loan options could work for your new business. But before you take on a loan be sure to do due diligence and compare your options.

Find out exactly how much the financing will cost you, as well as if your cash flow can handle the payments. You’ll then be in a position to choose the loan that gives your company the best opportunity to succeed.

Meredith Wood is the Editor-in-Chief at Fundera, an online marketplace for small business loans that matches business owners with the best funding providers for their business. Prior to Fundera, Meredith was the CCO at Funding Gates. Meredith is a resident Finance Advisor on American Express OPEN Forum and an avid business writer. Her advice consistently appears on such sites as Yahoo!, Fox Business, Amex OPEN, AllBusiness, and many more.