Outside funding can give your small business the boost it needs to grow and thrive. With that said, finding the best funding option will depend on several factors, including why you need the capital, when you need it, and your business’s overall qualifications. Here are the four most common financing options for small businesses.

1.) Personal investments

There are several ways you can use personal money to fund your business, although they carry risk as you’re utilizing your personal assets. One way is through cash savings. If you have money set aside in a savings account or investment portfolio, you can finance your business without any debt. 

Personal loans are another option, especially if your business is young and you may not meet the qualifications for a business loan. Alternatively, your friends and family may be willing to invest in your business in exchange for an ownership share. However, it’s important to consider the effect this may have on your personal relationships, and loans from friends or family should include established agreement terms. 

2.) The SBA

The U.S. Small Business Administration offers lenders a federal guarantee on your loan, making it less risky for them to lend you the capital you need. There are multiple types of SBA loans available, including SBA 7(a) loans, SBA 504 loans, and SBA microloans. They can be used for a wide variety of purposes and are available in amounts up to $5 million.

SBA loans are best for businesses that don’t meet traditional banks’ strict lending criteria. They can be easier to access, but you’ll still need a good credit score, strong annual revenue, and at least two years in business to qualify.

3.) Large national banks and small regional banks

Traditional banks are a good starting point and can help you figure out where you stand when it comes to qualifying for a loan. Types of small-business financing offered by banks include term loans, business lines of credit, equipment loans, and commercial real estate loans. 

Bank loans typically have low interest rates and competitive terms, but can be hard to qualify for. They are best for established businesses with collateral and strong credit. Big-name banks offer a variety of loan options, but don’t be surprised if they turn you away. Local banks may be a better resource for small business owners because they have a stronger interest in the development of the community. 

4.) Alternative lenders

Instead of banks or credit unions, alternative lenders are typically online-based, private companies that operate like the lending arm of a bank. Whereas bank loans are traditionally difficult to qualify for, alternative lending is more flexible and accessible, although they may have higher interest rates.

Here are some of the most popular alternative lenders and who they’re best for:

  • Fora Financial: Best for bad credit
  • Bluevine: Best for a business line of credit
  • OnDeck: Best for short-term loans
  • Fundbox: Best for quick approvals
  • Taycor Financial: Best for equipment financing
  • Funding Circle: Best for affordable, fast, longer-term loans

We’ve Been There So You Can Get There

When it comes to getting funding, you’re not in this alone. Independence Business Consulting understands the challenges facing small business owners when it comes to getting the capital they need. We have decades of experience consulting and securing funding for businesses, and our experts are ready to guide you through the process. Partner with us to find the best financing options for your business.