The number of seniors who own and operate successful businesses is growing. According to a JPMorgan Chase Institute study, firms led by entrepreneurs 55 and older have a better chance of survival than those led by younger entrepreneurs. As a result, senior business owners are an appealing demographic to lenders.
If you’re looking for loan options for senior citizens, here are some excellent loan and grant resources you could use.
Conventional Commercial Loans
Banks and other traditional lenders are a major source of loans for seniors. Typical commercial loans can provide borrowers with some of the most favorable terms. Terms for business loans usually range from one year to 25 years.
A strong credit score and a track record of being in business are usually required to qualify for a conventional commercial loan. If you’ve been in business for less than a year, lenders prefer a personal credit score of 650 or higher. If you’ve been in business for more than a year, conventional lenders look at your business and personal credit, giving your business credit more weight.
Alternative Loans
Alternative lenders, such as online financing marketplace providers, provide an additional option for senior business owners. Alternative lender loans are typically smaller than conventional ones, averaging around $80,000.
As a trade-off for their willingness to take on the risk of lending to borrowers with lower credit scores, alternative lenders often provide higher rates than traditional lenders.
Alternative lenders typically have fewer requirements than traditional lenders. When reviewing your loan application, they prioritize your business income and personal credit score. Some alternative lending products prioritize your business income over your credit.
SBA Loans
SBA loans are a good option if you don’t qualify for other loan products. They can be availed through a network of approved traditional and alternative lenders.
In exchange for providing loan guarantees, the SBA expects approved lenders to offer loans at rates that don’t go above a predetermined ceiling. This makes SBA loans more appealing to borrowers.
To be eligible for an SBA loan, you must meet the SBA’s minimum qualifications as well as any additional requirements set by your lender, which may include:
– An acceptable credit score.
– A personal financial statement at most 90 days from the submission date.
– Three years’ worth of business financial statements.
Other Loan Options
Other loan options you may want to consider are:
– Business credit lines, which operate similarly to credit cards.
– Accounts receivable financing (invoice financing), in which you receive a cash advance based on unpaid invoices owed to you by your customers.
– With merchant cash advances, you get money in exchange for a portion of your future sales.
– Equipment financing, in which you receive funds to purchase equipment while the equipment serves as collateral.
A loan specialist can point you toward these and other options appropriate for your business model, revenue level, and credit rating.
