Can You Get an Interest-Free Business Loan?

Interest-free business loans do exist, but choices are limited and tend to have unique qualification requirements. Here, we’ll walk you through available options for 0% interest business loans, as well as alternatives to consider for affordable financing.

An interest-free business loan, or 0% interest loan, is a small-business loan that doesn’t require you to pay any interest charges on the funding amount. Instead, you only need to repay the amount borrowed. In some instances, these loans will also have no additional fees (e.g. origination fees, closing fees), but this isn’t always the case.

Interest-free business loans may be available from nonprofit organizations, community development financial institutions (CDFIs) or specific government programs. Here are some options to consider:

Kiva is a nonprofit microlender that offers 0% interest crowdfunding loans up to $15,000. With Kiva, you submit an application and then invite friends and family members to lend to you. After this, you expand your campaign onto the Kiva platform, where anyone can donate money to your business. Once your fundraising is complete, you receive your loan funds and have anywhere from 12 to 36 months to repay.

To qualify, you must be living in the U.S. (entrepreneurs in North Dakota and Nevada are not eligible) and be at least 18 years old. You must have a PayPal account and be willing to demonstrate what Kiva calls “your social capital,” in other words, you’re willing to ask friends, family and others to donate to your campaign.

Kiva does not have any minimum credit score requirements nor does it require collateral.

LiftFund is a nonprofit CDFI that operates in 15 states. LiftFund offers different types of SBA loans, but also partners with local governments to offer interest-free business loan programs.

Currently, LiftFund administers 0% interest loan programs for the following cities in Texas:

Maximum loan amounts, repayment terms and qualifications vary based on the individual loan program.

The JFLA is a nonprofit organization that offers interest- and fee-free loans to businesses in Southern California. And despite its name, the organization welcomes borrowers of all backgrounds — there is no requirement to be affiliated with Judaism to qualify for financing.

Business loans are available up to $50,000 with repayment terms of 36 months. To qualify, you need to be located in Los Angeles, Ventura or Santa Barbara County. You must have a minimum credit score of 600 (680 for requests of more than $10,000). You must also demonstrate your ability to repay the loan and provide at least one guarantor. One guarantor is required for loan amounts up to $75,000, two are needed for loan amounts up to $36,000 and three are required for amounts up to $50,000.

Additional local organizations or state governments may also offer interest-free business loans. The Hebrew Free Loan Society, for example, issues 0% interest loans to businesses in New York City’s five boroughs, Westchester County and Long Island. Similarly, the Hebrew Free Loan Association of Northeast Ohio provides interest-free business loans to companies located in nine counties in Ohio.

Some state and local governments develop 0% or low-interest business loan programs in response to a disaster or other economic changes. The Florida Small Business Emergency Bridge Loan Program, for instance, offers 0% interest loans to help businesses “bridge the gap” between the time a disaster hits and when longer-term funding is available.

You can identify these types of opportunities by doing a localized Google search — “0% interest business loans in [Your Location].” You can also check government websites in your area, such as your local chamber of commerce or secretary of state.

If you can’t find an interest-free business loan in your area, you might consider these alternatives for affordable access to capital:

Some business credit cards offer an introductory 0% APR period, which typically ranges from six to 12 months or longer. During this period, you can carry a balance on your card without incurring interest charges. You must pay off the card before the intro period expires, however, or you’ll start accruing interest on your balance.

0% APR business credit cards can be a particularly good option for startups who want to finance their expenses while building cash flow. They can also be useful for making large purchases — as long as you can repay before the intro period is over.

SBA loans are partially guaranteed by the U.S. Small Business Administration and issued by lending partners like banks and credit unions. SBA loans are known for their low interest rates and long repayment terms.

The most popular SBA loan program, the 7(a) loan program can be used for a variety of purposes. Currently, interest rates range from 10.5% to 14%. To qualify for an SBA 7(a) loan, however, you’ll typically need good credit and multiple years in business.

If you can’t meet the 7(a) loan qualifications, SBA microloans are a little more flexible. Like many 0% interest business loans, SBA microloans are issued by nonprofit and community lenders. These loans are designed to help traditionally underserved businesses, such as startups and borrowers with lower credit scores.

Although interest rates are slightly higher than standard 7(a) loans — they usually range from 8% to 13% — SBA microloans are still a low-interest business loan option.

If you’re concerned about taking on debt, small-business grants can be a worthwhile alternative to business loans. Small-business grants offer free access to capital that doesn’t need to be repaid. You may be able to get a business grant from federal and state agencies, as well as private companies.