Need Financing for Your Music Business? Consider These Best Loan Options

financing options for music business
Need Financing

You always have a better chance of success if you love what you do. So, if you adore music, you can use your passion and creativity to launch a fantastic business venture.

But, funding a music business is not as easy as it seems. From opening your own recording studio to purchasing different types of musical instruments, setting up a rehearsal space, and covering daily operating costs, you’re going to need a significant amount of funds to successfully taking your music business to the next level.

So, what is the right small business loan for a music business? Well, it depends on the type of project you’re undertaking. You may require funds to buy a studio or musical gear or you might only need extra working capital to record labels or pay wages to music managers and promoters.

Keep reading while we’re sharing some of the most sought-after music business funding for each type of company.

Best Music Business Financing for Rehearsal Spaces and Recording Studios

Equipment Financing

If you don’t have sufficient funds to finance the new and modern musical instruments to open a recording studio or rehearsal space, equipment financing might be your perfect option. These loans are specially designed to help musicians purchase expensive equipment.

Since the purchased gear itself serves as collateral, you don’t need to pledge any asset to secure the loan. Once approved, the lender will lend you 80%-90% of the equipment value. Equipment financing usually has interest rates as low as 7.5% with repayment terms up to 5 years. If you default on your loan, the lender can seize the gears to recoup the losses.

Business Lines of Credit

If you need a flexible financing option for your recording studio for rehearsal space, go for a business line of credit. With a business line of credit, you’re given a predetermined amount of funds that you can be used when needed. It gives you the financial flexibility to use the money for business purchases like equipment, supplies, or operating expenses.     

You can draw funds from the pool of funds in whatever amount and you’ll only pay interest on the amount you actually use. Once you repay what you’ve used, the set credit limit will be available again to use.

There are two types of business lines of credit -secured and unsecured. You need to provide collateral to secure the loan with the former one while that later doesn’t require any assets as collateral from the borrower. You can finance from $1,000 to $500,000 with interest rates as low as 8% and repayment terms up to 2 years.

Best Music Business Financing for Record Labels

Business Credit Cards

business credit cards

The best way to finance your record label is by obtaining a business credit card. If you have a good personal credit score and minimal outstanding debt, you can successfully apply and get approved for a business credit card with lower interest rates. You can use a credit card for tickets, food, rentals, hotels, clubs, and concert venues.

Best Music Business Financing for Music Venues

SBA Loans

In addition to equipment financing and business lines of credit, an SBA loan is another great financing option for finance a music venue. If you have been in the business for at least two years, have a perfect credit score, and a positive cash flow, you can seriously consider applying for an SBA loan.

An SBA loan provides you a lump sum of cash that you can use to build out your space or to buy a property. Then you’ll have to repay the borrowed amount over time with a fixed or variable rate of interest. You can finance up to $5 million with an interest rate as low as 4% and repayment terms up to 30 years.

However, SBA loan has the most complicated loan approval process and you need to provide endless documentation to get approved for the loan. Moreover, you need to pledge any valuable personal or business asset as collateral to obtain funds. Moreover, it takes a few weeks to a month to get your loan approved.

Best Music Business Financing for Musical Equipment Sales and Repairs

Invoice Financing

invoice financing

Besides equipment financing, invoice financing is yet another viable funding option for music businesses. If you deal with a musical instrument shop and repair business, you probably rely on your customers to pay your invoices on time. When they don’t pay on time, you can’t keep your business afloat.

With invoice financing, you can use your outstanding invoices to obtain 80%-90% of the value of the invoices. This extra working capital helps music business owners normalize their operating cash when there are long invoice cycles.

You don’t need to provide collateral as unpaid invoices serve as collateral. As long as your business has a B2B model and currently has account receivables, you can qualify for invoicing financing.

Bottom Line

Since there are plenty of financing options for different types of music businesses, it’s always better to research your options before finalizing a lender or loan type. You can use an online lending marketplace to find and compare a variety of music business loan offers and choose one that best fits your current financial needs and budget.