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10 Options to Finance Your Small Business

Written by Banks Editorial Team

Updated April 16, 2024​

4 min. read​

small business finance

Whether you’re just starting or looking to expand, there comes a time that every business needs to seek financing to help them grow their company. Thankfully, there are more ways than ever for businesses to get the cash infusion they need to achieve their goals. In this post, we’ll detail some common and not-so-common options available to you.

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How Business Financing Can Help Your Small Business

There are many reasons a business may need financing. Initial startup costs or costs of expansion are common reasons. But you may also find that times have been slow, and you need additional capital to stay afloat. In addition, some businesses have taken on debt with higher interest rates and are looking to consolidate those debts into one, lower rate payment. Whatever the reason, you’ll find there are plenty of options for business loan funding.

Options to Finance Your Small Business

1. SBA Loans

For qualifying business types who meet the requirements, the United States Small Business Administration offers several programs in conjunction with traditional lenders that help small businesses get the funding they need.

2. Business Term Loans

These are the most common small business loans. Business term loans are traditional loans that provide you with a fixed amount of money to be repaid at a predetermined interest rate over a predetermined number of months.

3. Merchant Cash Advances

Merchant cash advances are an option for businesses that make any credit or debit card sales. With these types of loans, you will receive the funding you need and repay it through a percentage of your credit and debit sales.

4. Working Capital Loans

A working capital loan is a type of short-term loan designed to help your business pay its day-to-day expenses or take advantage of an opportunity for expansion. These are typically smaller loans as they are not meant for major acquisitions.

5. Invoice Financing or Factoring

If your business has enough outstanding invoices, then one of these options might be right for you. Invoice financing offers you a traditional-style loan on the number of your outstanding invoices. On the other hand, invoice factoring buys those invoices from you to give you the cash you need.

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6. Equipment Financing

When you need to purchase equipment for your business with enough value, the equipment itself can serve as collateral for your loan. Because these are secured loans, they can be easier to get than unsecured loans.

7. Business Lines of credit

A business line of credit is a type revolving around funding. Your business will be approved for a certain amount, and you can draw from that amount at any time. When you pay back what you owe, you can draw that money out again at a later date. Lines of credit tend to be larger and have better interest rates than credit cards.

8. Business Credit Cards

Similar to a line of credit, a business credit card offers revolving funds. However, the total amount you can borrow from a credit card tends to be lower than what you can get from a line of credit, though many credit cards offer perks such as cash-back, frequent flyer miles, or more.

9. Grants

The government and other entities often want to encourage a certain type of business, product or help certain demographics overcome hardships. To that end, there are many grants available to businesses that meet these qualifications. Grants are a type of funding that doesn’t need to be paid back.

10. Crowdfunding

Sites such as Kickstarter and Indiegogo have helped launch numerous products with funding that doesn’t need to be paid back. However, if you have something concrete that you can offer backers and have a large enough social circle to get support, crowdfunding may be a good option for your business as well.

Where to Find Financing Options for Your Small Business

The U.S. Small Business Administration (SBA)

The SBA has several programs available to help businesses get financing with low-interest rates and flexible payment terms. In addition to basic loan programs, they also offer micro-business financing. The SBA itself doesn’t issue the loans, however. Instead, getting an SBA loan requires going through a participating traditional lender.

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Traditional Banks

Business finance loans available through traditional banks include many of the options listed above. When going through a traditional lender, especially without the help of the SBA, you may have a hard time finding flexible payment terms and low-interest rates, particularly if your credit isn’t great. However, for qualifying businesses, these loans can be great.

Credit Unions

When you go through a credit union, you’ll find a nearly identical set of options as traditional banks offer. The difference is that credit unions are less focused on profit and more focused on member satisfaction. That makes credit unions a good place to try if a bank turned you down for not having high enough credit. Still, credit unions will have credit requirements that not every business can meet.

Alternative Lenders

Alternative lenders typically go beyond traditional loans and offer unique ways of offering business finance loans. These loans are typically available to businesses that do not meet the requirements traditional lenders impose. While some of these funding options may involve high-interest rates, others offer unique ways of bringing in funding with flexible terms.

FAQs About Small Business Financing

What are the financing options for a small business?

There are several ways of funding business loans available to companies today. First, the Small Business Administration has programs in place to help secure lending. Second, traditional loans can be acquired through banks and credit unions. Finally, there are a variety of alternative lenders now who may help when no one else will.

What is the best source of funding for small businesses?

The best source of funding depends on your needs and your credit score. Unfortunately, there is no one size fits all solution for funding business loans. Thankfully, however, there are enough options that everyone should find the right solution for them.

How can you qualify for a small business loan?

For a loan backed by the SBA, you’ll need to be a for-profit business that is not in one of the ineligible business categories. Ineligible businesses include insurance companies, financial institutions, and more. You’ll also likely need excellent credit to be approved for a small business loan.

How much money can you get for a small business loan?

The exact amount of money available to your particular business through a small business loan depends on factors such as the lender, your credit history, and your business income. However, the maximum amount available through small business loans is $5 million.

Is a small business loan hard to get?

Small business loans can be hard to get for those just starting because they require you to have good to excellent credit to qualify. In addition, because of the extra guarantees that come with SBA loans, the requirements are stricter than other forms of funding.

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