Small business owners, startup founders, and entrepreneurs may all benefit from business financing — even if it’s for a few thousand dollars. Getting loan amounts from $5,000 to $10,000 may be easier than asking for more money since lenders are always trying to weigh the risk. And it’s always a good idea to borrow only what your business needs. However, not all types of business financing offer that amount of money.
Let’s explore your funding options for any amount from 5K business loans to 10K business loans and the types of small business loans that may be available to you.
Term Loans From $5k to $10k
A business term loan is a lump sum of money that you borrow from a bank or other financial institution and pay back over a specific period of time. You’ll usually make monthly payments. The interest rate can be fixed (meaning it doesn’t change) or variable (meaning it can go up and down with the market).
Traditional banks, credit unions, and alternative lenders may offer term loans. Bank loans typically have the best interest rates, but borrowers usually need good to excellent credit scores to secure them.
Your term loan options can consist of short-term, intermediate-term, and long-term loans. Your best option for a small amount of money is often going to be short-term loans.
Short-Term Loans From $5k to $10k
When you’re looking to borrow a small amount of money, your best option may be to get a short-term loan. Intermediate- or long-term loans might require you to borrow $25,000 or more, so they may not be an option.
Short-term loans can provide the working capital your business needs to thrive with shorter repayment terms. They can be easier to qualify for than long-term loans. You’ll pay interest on a short-term loan, and the loan may charge an interest rate or a factor rate. A factor rate is similar to an interest rate but is expressed as a decimal point (rather than a percentage like interest rates). To find the total amount the loan will cost you, including interest, multiply the total amount you’re borrowing by the factor rate.
Here’s an example: You borrow $5,000 at a factor rate of 1.2.
$5,000 x 1.2 = $6,000
You’ll pay $6,000 total to take out this loan. When you’re looking for a short-term loan, it’s often quicker to get funds in your bank account from an alternative lender, but you may pay more to borrow.
Secured Loans From $5k to $10k
A secured loan requires collateral — and sometimes (like in the case of SBA loans) also a personal guarantee. Collateral is a way to secure a loan using assets like vehicles, real estate (including your own home), or inventory. The value of the asset usually must be the same as the amount you borrow. A lender can seize collateral if your business fails to pay back a secured loan, which is why it’s important to understand up front exactly what the total payments will be.
Unsecured Loans From $5k to $10k
An unsecured loan program means you don’t have to put down any collateral. However, you will often need a personal guarantee, which requires you to pay for the loan from your personal assets but doesn’t specify exactly how. A personal guarantee can be unlimited or limited, which limits the amount you would owe.
Whether you’re getting a loan from an online lender or traditional bank, your credit history will likely factor into whether or not you qualify for an unsecured loan. You’ll usually need good to excellent personal credit (and potentially business credit, depending on the loan). Having bad credit means you’ll likely have a difficult time getting an unsecured loan.
Small Business Administration Loans From $5k to $10k
The U.S. Small Business Administration (SBA) offers loans to small businesses with great rates and terms. While SBA 7(a) loans are the most commonly used by small business owners, small businesses who don’t need to borrow a lot of money can also get microloans. SBA microloans are capped at $50,000. The application process with the SBA is notoriously difficult, but microloans can be easier to qualify for than other SBA loans.
Before you apply, you’ll need to take steps like checking eligibility requirements, making sure you have good credit (including your personal credit score), and putting together a detailed business plan. Additionally, you may not need collateral for SBA loans under $25,000.
Equipment Financing From $5k to $10k
Equipment financing is when you borrow money to pay for equipment, machinery, or supplies that your business needs. Construction businesses use equipment financing a lot to get necessary machinery, but you can also use this type of loan to equip an office with computers and printers.
Equipment loans work well for businesses that don’t want to interrupt their cash flow to add the supplies they need to operate or grow.
Invoice Financing From $5k to $10k
Invoice financing, also called invoice factoring, is one way of managing unpaid invoices from business customers. (Invoice factoring is usually not available to businesses that sell directly to customers).
With invoice factoring, you’ll hand over outstanding accounts receivable, which is what your customer owes, to a factoring company. The factoring company will then contact your clients to gather payments and close out the invoice. You’ll pay a fee to the factoring company for managing the invoices, which can get costly and eat into profits.
Lines of Credit From $5k to $10k
A business line of credit might be a great option for businesses looking to secure between $5,000 and $10,000 in financing. With a line of credit, your business can withdraw from a pool of money up to your credit limit, and you’ll usually only pay for what you borrow. Lines of credit can help immensely with business cash flow problems, and it can be useful to secure a line of credit before you need it so it’s available immediately.
Merchant Cash Advances From $5k to $10k
A merchant cash advance is another option for borrowing a small amount. The application is quick and usually digital, and the funding times are often faster than other loan options. Merchant cash advance providers use a factor rate to calculate how much it costs to borrow, and they may require your business to make daily payments. Keep in mind that merchant cash advances can be one of the more expensive business financing options, so make sure to shop around to see if you qualify for other choices first.
Business Credit Cards
You may be able to qualify for business credit cards that cover business expenses up to $10,000. Credit cards can be easier to get than a business loan and the application is usually faster and easier, so it might be the right choice for your business. Even if you don’t qualify for the entire credit limit you’re hoping for in the beginning, you can often get a credit limit increase after a few months or one year of using the card responsibly.
The interest rates on credit cards may be higher than other loan options, so be sure you understand how much the card is charging you to keep a revolving balance.
Next Steps for Small Business Financing
Business funding can make all the difference for your small business’s success. In addition to the ideas mentioned above, you can also look into personal loans. Crowdfunding is another choice, which can come in the form of rewards-based crowdfunding or equity crowdfunding, especially if you need less than $10,000. Using Nav is the simplest way to find the right funding options for your business today.