What to Do If Your Business Loan Wasn’t Enough

5 min read • Mar 03, 2021 • Mary Kate Miller

Granted a loan but the amount isn’t what you hoped for? You’re not alone. Given the challenges of the coronavirus pandemic, many small business owners have found themselves in need of more capital. On the flip side, many lenders are loaning smaller amounts than they were pre-pandemic. So what can you do if your business loan wasn’t enough to meet your needs? 

Here are 5 strategies that can help. 

1. Apply for Grants

You may be able to supplement your small business loan with funds from a grant. Grant recipients don’t have to repay funds, so a grant is pretty much free money for your business. Both private and public grants have proliferated in response to the coronavirus pandemic, providing much-needed support for small businesses across America. Dive in and learn everything you need to know with our guide to Accessing the Free Money of Small Business Grants

2. Use Credit Cards Strategically

Credit cards can be an ace up your sleeve when it comes to financing your business. If you need funds to make a large purchase or finance a piece of equipment, a 0% introductory APR credit card can help you do it. Because credit cards tend to have higher interest rates, you likely want to wait to open a card until you have something specific that you want to use it to finance. 

If the idea of using a credit card as financing makes you feel hot under the collar, you’re not alone. Many people view business credit cards the way they view a personal credit card approach, which makes sense. We’re inundated with personal finance advice that reminds us not to spend more than we’re making. Businesses, on the other hand, aren’t limited to a set salary. The gross revenue you can generate is sometimes limited or dictated by investments you’re able to make in your business. Learn more about the ways business finance differs from a personal finance approach

3. Repay the Loan as Quickly as Possible 

Repaying your loan as fast as you can afford can help you access additional funds. Once you’ve repaid your loan, you may apply for a new loan. This approach may help you reach the total capital amount you need. Plus, having an established history of loan repayment may lead lenders to see you as a more reliable borrower, increasing the likelihood that they’ll fund you for a larger sum.

Before you pursue this strategy, you should check your current loan details to see if your loan has early repayment fees. Some lenders charge these to recoup interest payments they don’t get when you repay early. If your lender doesn’t charge early repayment fees, you should definitely consider this strategy. Even if they do, it may still be worthwhile. You just want to know what costs to expect before you proceed. Nobody likes a surprise fee. 

4. Consider Debt Consolidation Down the Road

You may be able to take out a second business loan to give you the capital you need, but you will have to be sure to use those funds to repay your existing debts. You then make payments toward your second, larger loan. When approached this way, receiving a second business loan is called debt consolidation

Don’t take out a second loan without repaying the first. That’s a practice known as loan stacking, and it will likely put you in hot water with your lender. Many loans prohibit loan stacking within their terms, and you don’t want to violate the terms of your loan—it will make it so much harder to secure financing down the road. Reading this in a panic because you got some bad advice and now you have multiple loans? Take a deep breath. You’re not alone. Funding managers often help people in this situation. If you want a sneak preview, read the paragraph above (hint: the secret is likely debt consolidation). 

5. Play the Long Game

If none of the other options appeal to you, you can focus on playing the long game. Set a clear repayment strategy for your loan. Calendar recurring payments and always be sure to make payments on time. This method will help you build business credit, making you a more appealing borrower to lenders. Once you have an established loan repayment history, lenders are more likely to award you a larger loan amount the next time you apply for a loan. 

That might be the most important takeaway: just because you weren’t awarded the amount you hoped for this time, it doesn’t mean you should abandon business loans as a financing strategy. Many savvy business owners know how to use a series of smaller, shorter-term loans to help them meet their changing financing needs. With a COVID-19 vaccine in sight, we’re starting to see the light at the end of the pandemic tunnel. As the economy stabilizes, lenders will be more comfortable lending larger sums again. Focus your efforts on building your business credit now, and in time you may find the sky’s the (credit) limit— metaphorically speaking.

 

Disclaimer: The information provided in this post does not, and is not intended to, constitute business, legal, tax, or accounting advice. All information, content, and materials available in this post are for general informational purposes only. Readers of this post should contact their attorney, business advisor, or tax advisor to obtain advice with respect to any particular matter.
Mary Kate Miller

Mary Kate Miller

Mary Kate Miller is a writer based in Chicago, IL. She specializes in covering finance (personal and business), investing, and real estate. Her mission in life is to give readers the confidence and the knowledge needed to grow their wealth by making financial topics more accessible. When she's not writing about topics like business loans, you can find her playing armchair financial advisor to the Real Housewives.