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Business loans vs. crowdfunding

Compare loan amounts, turnaround time and costs to find the right type of financing for your business.

You might have heard of crowdfunding as a free alternative to business loans. And for some new or underperforming businesses, crowdfunding 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

Business loansCrowdfunding
How it worksApply to borrow a one-time lump sum of funds from a lender and pay it back plus interest and fees over a set period of time, usually three months to 10 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 eligibilityGood personal credit, at least one year in business, at least $5,000 in monthly revenue or $100,000 in annual revenueFew to no restrictions
Cost4% to 30%+ APR
  • Rewards-based: Platform fee of 5% to 15% of the money raised, plus a payment processing fee of 2.5% to 6%
  • Equity: Platform fee varies, plus ownership stake in your business
Financing amounts$5,000 to $500,000, with some lenders offering up to $1.25 million
  • Rewards-based: Usually no limit
  • Equity: $50,000 to $10 million
How long it takesOne day to a few monthsA few weeks to a few months
Where you can get it
  • Banks
  • Online lenders
  • Credit unions
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 instalments 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 personal credit typically can get the lowest rates.

Applying for a business loan involves submitting an application and copies of documents like your business’s bank statements and tax returns. If you get approved, your lender will send you loan documents which must be signed and returned before you can receive 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 financial institution. Smaller loan amounts typically get processed faster than larger loan amounts.

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 personal 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 personal credit.
  • Your business has spotty cash flow.
  • Your business is already struggling to pay off debt.

Compare business loans

Name Product Interest Rate Loan Amount Loan Term Minimum Revenue Minimum Time in Business Loans Offered
SharpShooter Funding Business Loan
Prime pricing from 9.00%
$500 - $250,000
6 - 120 months
$10,000 /month
100 days
Unsecured Term, Merchant Cash Advance, Invoice Factoring
To be eligible, you must have been in business for at least 100 days with a minimum of $10,000 in monthly deposits.

SharpShooter provides capital to small businesses that are underserved by banks and credit unions. It measures overall business health and potential rather than focusing strictly on traditional metrics. Fill out a simple application and get pre-approved in minutes. Receive your funds within 24 hours.
Swoop Funding Business Loan
4.00% - 25.00%
$1,000 - $5,000,000
3 - 60 months
$10,000 /month
24 months
Term, MCA, LOC & more
To be eligible, you must have been in business for at least 24 months and have a minimum of $100,000 in annual revenue.

Swoop partners with banks and alternative lenders to match your business with the right funding options. Register for free and browse your offers without affecting your credit score.
Lending Loop Business Loan
Starting at 4.96%
$1,000 - $500,000
3 - 60 months
$8,500 /month
12 months
P2P
To be eligible, you must have been in business for at least 12 months and have a minimum of $100,000 in annual revenue.

Lending Loop is Canada’s first regulated peer-to-peer lending platform. Complete an application in 5 minutes. Once you accept your loan offer, investors will begin to fund your loan on the marketplace. Your loan will be transferred to your bank account when it is fully funded.
OnDeck Business Loan
8.00% – 29.00%
$5,000 - $300,000
6 - 18 months
$10,000 /month
6 months
Secured Term, Line of Credit, Merchant Cash Advance
To be eligible, you must have been in business for at least 6 months with a minimum monthly revenue of $10,000.

OnDeck offers fast and simple financing. Apply in less than 10 minutes with your basic business information and see your loan offers without hurting your credit score. Get approved within 1 business day, and choose your term, amount and payback schedule once approved.
Loans Canada Business Loan
Prime Pricing from 9.00%
$2,000 - $350,000
3 - 60 months
$4,166 /month
100 days
Unsecured Term
To be eligible, you must have been in business for at least 100 days, have a credit score of 410+ and show a minimum of $4,166 in monthly deposits ($50,000/year).

Loans Canada connects Canadian small business owners to lenders offering financing up to $350,000. Complete one simple online application and get matched with your loan options.
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How does crowdfunding work?

Crowdfunding is a way for your business to raise a one-time sum of money that it doesn’t have to repay. There are a few different types of crowdfunding, though rewards-based and equity crowdfunding are the most common. 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 tends to be a popular option for financing a new cannabis business.

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 personal credit score, time in business and revenue usually matter.

However, peer-to-peer business loans typically aren’t as fast to fund as loans from direct online lenders since you have to wait for investors to fund your loan.

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.

  • 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 lenders requirements.
  • Lines of credit. Worried about over-borrowing with a term loan? A line of credit gives you access to a certain amount of funds that you can draw from as you need. Plus, you’ll only pay interest on what you borrow.
  • Credit cards. If you need to cover a small expense quickly that your business can pay off fast, a business credit card could be more manageable than a loan or crowdfunding.
  • 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.
  • 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.
  • 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.

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