Recently, I interviewed a c-level executive from a bank which provides loans to small businesses. This bank specializes in 7A SbA Loans where the US government picks up between 50 – 85% of the losses, in the event that the borrower defaults. Even with government backing, this executive said that the bank had to be 98% sure that the small business borrower would not default. That is a pretty high bar. By their very nature, small business loans are risky. A small business trying to expand is going be taking on additional risks as they will be increasing their expenses.
What are the options for a small business trying to raise capital? First, try to get an SBA Loan (learn how to apply here). Your second cheapest source of capital might be taking a personal loan instead of a business loan. Business loans from places like Kabbage and OnDeck have interest rates that can exceed 50%.