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Business loans vs. crowdfunding

Compare loan amounts, turnaround time and more to find the right fit for your business.

You might have heard of crowdfunding as a free alternative to business loans. And for some new or underperforming businesses, it can be a cheaper option with the bonus of raising brand awareness. But business loans might be a better choice if your company needs funding fast, doesn’t have the marketing resources to get the most out of crowdfunding or doesn’t want to give up equity.

Business loans vs. crowdfunding at a glance

How it works

Apply to borrow a one-time funding amount from a lender and pay it back plus interest and fees over a set period of time, usually five to 20 years.

Set up a campaign on a crowdfunding platform to raise money from the public or investors, often in exchange for rewards or equity.

Typical eligibility

Good credit, at least one year in business, at least $100,000 in annual revenue

Few to no restrictions


4% to 99% APR

  • Rewards-based: Platform fee of 5% to 15% of the money raised, plus a payment processing fee of 3% to 6%
  • Equity: Platform fee varies, plus ownership stake in your business

Financing amounts

$5,000 to $5 million

  • Rewards-based: Usually no limit
  • Equity: $50,000 to $10 million

How long it takes

One day to a few months

A few weeks to a few months

Where you can get it

  • Banks
  • Online lenders
  • Credit unions
  • Community development financial institutions (CDFI)

Online crowdfunding platforms

How do business loans work?

Business loans are a type of credit where your business borrows money and pays it back in installments over a set period of time, plus interest and fees. Business loans can be useful for any one-time expense like expansion, a small project or buying new equipment. Businesses that have been around for a while, are cashflow positive and have owners with good credit typically can get the lowest rates.

Applying for a business loan involves submitting an application and documents like your business’s bank statements and tax returns. If you get approved, your lender sends you loan documents to sign and return before receiving your funds.

The whole process can take as little as one day if you apply with an online lender and as long as three months if you apply with a bank. Smaller loan amounts typically get processed faster than larger loans.

Should I consider a business loan?

Not sure if a business loan is right for you? Here’s when a business loan could be a good idea — and when it might not be. While you can still get a business loan if you have bad credit or your company has only been around for six months, you likely won’t get the most competitive rates.

Consider a business loan if…

  • Your business is at least one year old.
  • You have good credit.
  • Your business is profitable.
  • You need money fast.
  • Your business can afford to take on more debt.

Try something else if…

  • You need seed money for a startup.
  • Your business is less than a year old.
  • You or another business owner have bad credit.
  • Your business has spotty cash flow.
  • Your business is already struggling to pay off debt.

Top business loan providers to compare

1 – 5 of 5
Name Product Filter Values Min. Amount Max. Amount APR Requirements

Lendio business loans
Finder Rating: 4.75 / 5: ★★★★★

Lendio business loans
Starting at 6%
Operate business in US or Canada, have a business bank account, 560+ personal credit score
Submit one simple application to potentially get offers from a network of over 300 legit business lenders.

OnDeck short-term loans
Finder Rating: 4.6 / 5: ★★★★★

OnDeck short-term loans
As low as 35%
600+ personal credit score, 1 year in business, $100,000+ annual revenue, active business checking account
A leading online business lender offering flexible financing at competitive fixed rates.

Biz2Credit business loans
Finder Rating: 4.7 / 5: ★★★★★

Biz2Credit business loans
Starting at 6.50%
6+ months in business; $100,000+ annual revenue; 500+ credit score
Get only the capital you need through secure, prescreened lenders with this highly rated company offering SBA, expansion, working capital and other loans.

ROK Financial business loans
Finder Rating: 4.7 / 5: ★★★★★

ROK Financial business loans
Starting at 6%
Eligibility criteria 3+ months in business, $15,000+ in monthly gross sales or $180,000+ in annual sales
A connection service for all types of businesses — even startups.

Fundbox lines of credit
Finder Rating: 4.2 / 5: ★★★★★

Fundbox lines of credit
Not stated
6 + months in business, $100,000+ in annual revenue, 600+ credit score
Get flat rate, short-term financing based on the financial health of your business, not your credit score.

Compare up to 4 providers

How does crowdfunding work?

Crowdfunding is a way for your business to raise a one-time sum of money that it doesn’t need to repay. There are several different types of crowdfunding, though seed funding — or rewards-based crowdfunding — and equity crowdfunding are common options. Both typically take around a month to raise the funds you need and are great for exciting projects.

With rewards-based crowdfunding, your business sets up an online campaign to raise money from fans, family and friends and offers prizes in return for donations. With equity crowdfunding, your company raises money from investors in exchange for a share of ownership in your business.

Rewards-based crowdfunding is usually better for small, creative projects with wide appeal that you can get across with a short video. Equity crowdfunding is typically better for businesses that want to expand or launch a project that they predict will be profitable. It can also be a good source of seed capital for startups, and it’s one of the more popular cannabis industry financing options.

Should I consider crowdfunding?

Crowdfunding is ideal for businesses that have an exciting or profitable project on the horizon. But there are some situations where you may want to think twice.

Consider crowdfunding if…

  • Your business can’t qualify for a loan.
  • You need money to start a business.
  • You’re in a high-risk industry.
  • You don’t need money right away.
  • You have the resources to make a compelling campaign.

Try something else if…

  • You offer a niche product or service.
  • You don’t have a marketing team.
  • You don’t have the time to spend making a strong campaign.
  • You need working capital.
  • You want funding fast.

Peer-to-peer lenders: Business loan or crowdfunding?

Peer-to-peer (P2P) lenders fall somewhere between a type of business loan provider and a crowdfunding platform. These lenders work like a crowdfunding platform to connect you with investors who want to profit from your business’s interest payments.

But the actual process of applying, getting approved and repaying your loan works more like a business loan. You rarely need to submit a pitch deck or marketing video. And your credit score, time in business and revenue usually matter.

And peer-to-peer business loans typically aren’t as fast as loans from direct online lenders, however, since you often have to wait for investors to fund your loan. With LendingClub, one of the top P2P lenders in the country, the whole process can take several days from the time you’re approved.

6 business financing alternatives to consider

Struggling to qualify for a business loan? Don’t have the time to invest in a crowdfunding campaign? Here are some other ways to get financing for your business.

  1. Personal loans. While you might need good credit to qualify, a personal loan for business use could be an option if your business doesn’t meet most business lender requirements.
  2. Lines of credit. Worried about over-borrowing with a term loan? A line of credit gives you access to a certain amount of funds to draw from as needed.
  3. Credit cards. If you need to cover a small expense quickly that your business can pay off fast, a business credit card could bemore manageable than a loan or crowdfunding.
  4. Factoring. High-risk industries like trucking that rely on invoices might have an easier time qualifying for factoring. This involves selling your unpaid invoices to a factoring company at a discount to get access to the money you’re owed.
  5. Merchant cash advances. This option gives retail businesses and other companies reliant on credit cards an advance on future sales. It’s typically more expensive than a loan or crowdfunding, but it’s also one of the easiest types of financing to qualify for.
  6. Grants. Startups, nonprofits and businesses with a social mission might be able to qualify for a business grant, which you don’t need to repay.

Bottom line

Business loans can be a good financing option for businesses that have been around the block a few times, need money for run-of-the-mill expenses or need cash fast. But if you’re a startup, can’t qualify for a business loan or are working on a buzz-worthy project, crowdfunding could be the way to go.

Don’t think either can give your business what it needs? Find even more financing options and compare lenders by reading our guide to business loans.

Frequently asked questions

How do I get a business loan for my startup?

Startup loans tend to rely on the owner’s personal credit and financials and might not be as competitive as personal loans. Check out our guide to startup financing to learn more about your options beyond crowdfunding.

What fees are involved with getting money through crowdfunding?

Most crowdfunding sites charge a fee to use the platform — usually a percentage of the money raised. You also likely have to pay a processing fee for any credit card donations. Additionally, factor in the cost of delivering any rewards or giving up partial ownership of your business.

What business loans are available for the cannabis industry?

There are a few business lenders that are willing to work with cannabis businesses, though equity crowdfunding is often a more popular way to get funded. Read our cannabis business financing guide to learn about your options.

More guides on Finder

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