Best small business loans for $100,000 or less

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Page written by Chris Godfrey. Last reviewed on April 11, 2024. Next review due October 1, 2025.

Supporting big expansion plans, making key acquisitions, ramping up production, or simply restructuring your business finances can often be tough using only working capital – which is why many organizations turn to business loans of $100,000 or less to fund their plans and growth. Read on to learn more about these types of finance, what they can do for you, and how to get the loan that suits your business best.

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What business loans are available for $100,000 or less?

There are many types of business loan available for $100k or less – each has its pros and cons:

Business term loan

Commonly used for one-off investments where you know exactly how much cash you need. Commercial real estate purchases, plant and equipment investment, and debt repayment and restructuring activities work well with this kind of loan. You receive a single, lump-sum cash injection and then pay it back in regular instalments, plus interest and any fees, over a fixed period of up to 25 years.

Pros: Fixed interest rates and predictable repayment instalments
Cons: Few options to ask for extra funding or change the terms of the loan after closing

Business line of credit

This is a business loan that functions like a high-value credit card but comes with lower interest rates and fees. Organizations can withdraw as much as they want when they want from a loan facility up to the limit of their borrowing. Interest rates are usually fixed, and businesses may repay on a set or flexible schedule. This line of credit is ideal for organizations that want maximum flexibility or for investment situations where the total cash required is unknown. However, expect the lender to request regular financial updates and increased cashflow monitoring as part of the deal.

Pros: Only pay interest on the cash you use
Cons: Higher levels of reporting usually required to maintain access to the loan facility

Invoice financing

Also known as account receivables financing, this type of loan allows you to borrow against the value of your unpaid invoices and is best for B2B organizations. The lender will usually provide up to 95% of the invoice value within a few days or even hours of the bill being raised. You may still be responsible for collecting the cash from your clients, or the lender (also known as the ‘factor’) may collect on your behalf. If you collect, you must repay the lender on their schedule. If they collect, they will take back their advance from the client’s payment and then pass any residual sum (after charging interest and fees) back to you.

Pros: Get paid in days instead of waiting weeks or months
Cons: High fees and interest rates. You may lose control of your sales ledger

Merchant cash advance

Available for businesses that accept customer payments by credit and debit card. You borrow against the value of your card sales. As your card sales increase, your borrowing limit goes up. Pay the loan back with a fixed percentage of your card sales on a daily, weekly or monthly basis. Your sales act as security for the loan, no added collateral is required.

Pros: No added collateral required. The loan facility grows as your card sales go up
Cons: Not suitable for businesses that don’t take card payments. Loan facility can also go down if your card sales fall

Revenue-based financing

Functions like a merchant cash advance but with higher borrowing limits. Based on the size and regularity of their total revenues, (not just their credit card sales), businesses may receive a lump sum and pay it back over a short-term schedule, typically by small deductions from their daily sales. This type of loan can usually be secured quickly as qualification rules are less intensive and credit scores are not so critical. The loan may also be structured as subordinated debt which can keep the pressure off your existing and future banking relationships.

Pros: Fast and easier to secure than many other large business loans
Cons: Strong cashflow necessary to service the loan

Equipment financing

Buying big ticket machinery and equipment can put a major dent in your cashflow, but equipment loans can pay for your new plant and machinery without causing financial stress. Equipment loans are ‘self-collateralizing’ – they use the asset you’re financing as security, similar to a car loan or a residential mortgage. Once the loan is approved, the lender sends the funds to the equipment vendor, who then delivers the machinery. You use the equipment as you pay for it and the lender maintains a lien on the title to the machinery. Once you pay the loan back, the lender releases the lien, and you own the equipment outright.

Pros: No need to provide your own collateral
Cons: Can only be used for equipment purchasing, does not provide any cash

SBA 7a loans

As well as the loan options shown above, organizations may also seek an SBA 7a business loan. Provided by banks, credit unions and online lenders who are part of the Small Business Administration (SBA) lender network, and partially backed by the US Government, these loans can provide up to $5million to qualifying borrowers with repayment terms as long as 25 years.

SBA loans usually come with much lower interest rates and fees than other commercial lending, but meeting their strict rules of eligibility can be tough for many businesses. As well as an approval process that can take several months, organizations will typically need to have been in business for at least four years and have annual revenues over $180,000. Your personal credit score must be at least 680.

Pros: Lower interest rates and fees
Cons: Strict rules on eligibility

SBA Microloans and Community Advantage loans

Nonprofit and community-based lenders can provide SBA Microloans and Community Advantage loans for businesses that struggle to secure standard business loans of $100k or less. These types of SBA loans are ideal for underserved communities, including women, veterans, minorities, immigrants and refugees.

SBA Microloans are available up to $50,000 and can usually be secured with FICO scores as low as 500, or even with no credit score at all. However, they often require collateral or a personal guarantee that makes you personally responsible for the debt, not your business. Community Advantage loans function much like regular SBA 7a business loans but come with a maximum of $350,000 and other features that may make them easier to secure.

Alternative funding options

If your business doesn’t qualify for a $100,000 business loan, there are other ways to secure the funds you need to make your business grow:

Business credit cards

If you have good credit, it may be possible to secure a business credit card with a high limit to fund your organization. The application process is usually online, fast, streamlined and does away with the need for piles of paperwork – in many cases you won’t even need a formal business structure to apply. Business credit cards are also great for building a good credit history if you pay off the balance every month. You may even get free travel and shopping rewards with the points you accrue.

External investors

If you’re seeking outside investment, there are networks of venture capitalists and angel investors readily available online. Bringing in external investment can give you the cash you need, and it may also deliver a unique and extra set of skills and contacts that can help your organization grow even faster.

Note that investors will usually want a piece of the action in exchange for their money. This will mean you giving up a share of your ownership and may loosen your overall control of the business. Some investors may also want higher dividends or royalty payments as well as their share of equity. Venture capitalists and angel investors are also notoriously picky about the businesses they choose to back. You could spend many months pursuing one lead after another before you find the right match.

Crowdfunding

Available via various online platforms, crowdfunding can bring in large sums if your presentation hits the right spot. Although it may be tough to raise $100k in small donations from hundreds of donors, this cash is essentially free as there is no interest to pay and you do not need to repay the money if you spend it where you said you would. An eye-catching idea and a powerful pitch is essential to succeed with this funding option.

How to qualify for a $100,000 business loan

Business loans for $100,000 or less can be obtained from almost any lender, but loans from banks and credit unions typically come with lower interest rates and stricter rules of approval, whereas loans from online and alternative lenders may cost you more but approval rules are easier. As a rule of thumb, the larger the sum you are trying to borrow, the harder lenders will look at your business and your application.

How to improve your chances of getting approved

You can improve your chances of getting approved for a $100k or less business loan by preparing in advance. Key tasks to take care of include:

Identify your need for the loan. Why do you need the money? You must present a strong case for funding to secure a large business loan and your financial records must support this need, indicating how the loan will deliver your plan – and critically, how you will pay the loan back.
Check your personal and business credit scores. It is common for mistakes to occur on credit reports. Incorrect information could have an adverse impact on your loan application. Note that business credit scores are usually graded from 1 to 100 and are different than personal FICO scores. A good business credit score is 80+. Additionally, not all organizations will have a business credit score, in which case, the lender will scrutinize your personal credit report. Ensure it is correct. If there are errors, get them fixed before applying for your loan – and be aware that fixing a credit score can take time and there are no ‘fast credit repairs’ despite the many promises from online ‘credit doctors’ who say they can perform miracles for your score.
Get your paperwork in order. Lenders will need to see bank statements (at least 18 months), balance sheet, profit and loss statements, cashflow projections, list of debts, list of assets, customer database, documents that reveal the structure of your business (corporation, LLC, etc.), certificates of good standing, tax statements and more.
Collateral. Lenders like to know they can get their money back if things go wrong. Often this means you must provide security for the loan – collateral – usually in the form of real estate or some other hard asset that the lender can sell to recover their funds if the worst should happen. If you don’t have sufficient collateral yourself, you could ask a cosigner who has real estate or other assets to join the deal. Most lenders will want collateral to the full value of the loan and will usually consider provided assets at less than general market rates – known as the ‘distress value’ – as they may need to sell the assets quickly, often by auction where values tend to be lower.
Build a good business plan and pitch. This goes back to your need for the loan. Depending on how much you are asking for, lenders will expect a detailed and insightful business plan that explains why you need the funds and what they will do for your business once you have them. Business plans should do more than paint a rosy picture – explain the risks involved, what the downsides could be – and how you intend to overcome them. If you cannot produce a business plan yourself, it may be worth paying an external service to do this for you.

What affects your chances of getting a business loan?

Business loan applications can be affected by a number of different factors:

Credit score – typically you need 80+ for business credit and 550+ for personal FICO (600+ with many major banks and credit unions)
Length of time in business – start-ups and very young businesses will find it more difficult to secure a business loan
Business track history – this means having a strong financial record and a habit of paying your debts on time
The type of industry you operate in – some business sectors are riskier than others
Sufficient documentation – lenders will need to see accurate and up to date records
Use of funds – what you want the money for is important. Lenders will usually want to see the funds will be used to power growth

How to find a business loan for $100,000 or less

Once you have your paperwork ready it makes sense to shop around for different business loan offers before settling on a lender. You can do this by approaching banks, credit unions and online lenders one by one, or you can use the services of a loan marketplace that will introduce you to a choice of loan deals from different lenders.

Some marketplace platforms can also give you advice and help you with the application process. This can be especially useful for business owners who have never taken out a business loan before.

Get started with Swoop

No matter if you’re seeking your first business loan or you’re a seasoned borrower, working with business finance experts can make all the difference when applying for your loan. Contact Swoop to discuss your borrowing needs, get help with your application and to compare high-quality $100k or less business loans from a choice of lenders. Give your organization the financial boost it deserves. Register with Swoop today.

Written by

Chris Godfrey

Chris is a freelance copywriter and content creator. He has been active in the marketing, advertising, and publishing industries for more than twenty-five years. Writing for Barclays Bank, Metro Bank, Wells Fargo, ABN Amro, Quidco, Legal and General, Inshur Zego, AIG, Met Life, State Farm, Direct Line, insurers and pension funds, his words have appeared online and in print to inform, entertain and explain the complex world of consumer and business finance and insurance.

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