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Accessing Credit: Small Business Capital

You may be wondering why your personal credit history matters if you’re looking to borrow as a business rather than for something personal. Often lenders will want to look at your personal credit history because business loans are typically personally guaranteed, which means you will personally be responsible for the loan if your business can’t pay it anymore.

Fortunately, there are a couple of well known organizations that aim to help small businesses access capital.

Traditional lending - The SBA

One of the most well known and trusted business lenders is the Small Business Administration (SBA). This is a nationwide organization that is well connected with many helpful local resources and services. If you do not have a social security number,  alternative lending may be a better option for you.

Alternative Lending

There are some lending options that do not require a SSN. These include financial products from local banks, Community Development Financial Institutions (CDFIs), and  CAMEO, a network of non-profit community lenders in California. A chart with more details about different funding options is included below. As your business grows, you will be able to build business credit the same way you build personal credit.

 

Traditional lending Alternative lending Investors Community Grants Crowdfunding Friends and Family
Type SBA & Bank loans CDFl & Non-profit lending Private investors Immigrants Rising Entrepreneurship Fund KIVA, Kickstarters, Indiegogo, Cashmob Personal loans
Amount $5k-5M $5k-500k $1k-5M $500-$10k $1k-500k $2k-50k
Interest rates Low (2-10%) Low-Med (5-15%) N/A N/A (grant) Low (0%-5%) N/A
Business stage 2+ yrs of Start-ups ok Start-ups ok Start-ups ok Start-ups ok Start-ups ok
Immigrantion status Residency Required ITIN ok (sometimes) Depends ITIN ok ITIN ok (typically) N/A
Benefits & Disadvantages Low interest, but harder to obtain Business support can be strict Flexibility, need to ensure high return on investment “Free” money, but low amount Low interest, but requires work to raise $ Fast turn-around, need to ensure returns to pay $

 

There are also a number of helpful resources available through federal and non-profit agencies (see resources section).

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