The Ultimate Guide to Small Business Funding Options

The Ultimate Guide to Small Business Funding Options

Looking to start a business or expand your current company? A small business loan can accelerate your growth and save you time. But what types of loans are available for you to consider? Check out our guide to all the small business funding options which are available to you.

They say starting a business is either the best or worst idea you’ll ever have. How do you make sure it’s the first and not the worst?

You make sure you have a solid plan before you so much as look at an empty office or retail space. Part of doing that is exploring your small business funding options.

Where will you get the money it takes just to open your doors? Maybe you have a giant nest egg you’re sitting on. If so, that’s great.

Most people don’t have enough in their savings to start a business by themselves. That’s where your lending options come in.

Learn where you can get your cash below.

Small Business Funding Options

So, you know you need money, but where do you get it? The answer depends on how much money you need, what you’re starting with, and your lending ability.

Let’s start with the most common option, a small business loan.

Bank Loans

People have used banks to back their small businesses since the beginning of banks. To qualify for a bank loan, you need to show a plan and collateral.

Collateral is when you sign over something to the bank in case you default on your loan. It’s insurance of a type for the bank, so they at least get some of their money back.

Bank loans give you flexible terms and repayment schedules. Your interest rate depends on the market at the time, as well as your credit score and the risk level of your business.

If bank loans are so versatile, why do we need more options? Upwards of 70% of loan applications get denied.

If you weren’t able to get a bank loan, or need more than they can give you, check out the other funding options below.


In the spirit of developing small businesses, the Small Business Administration created microloans.

Microloans are like bank loans but in smaller amounts. The average microloan is around thirteen thousand dollars.

The Small Business Administration is the distributor and partners up with local lenders who provide the cash.

In some places, microloan recipients get a business mentor and access to other types of coaching. Assets America is a good example.

To qualify for a microloan, borrowers must have a business plan put together at the time of application and a good credit history.

Microloans are the funding behind the site Kiva, where you can give loans of under $100 to entrepreneurs in developing countries.

Credit Cards

Yes, credit cards make the list. They’re easy to get if you have a good credit score and even easier to spend.

Businesses can apply for credit cards separate from their personal owner’s accounts. This opens up a new avenue of less hard-to-get money for paying off opening costs and materials.

The problem with credit cards is they take a long time to pay off, depending on their interest rate and fee schedule.

Company credit cards can have multiple users, to give employees spending options.

If you choose to use credit cards as a funding source, make sure you make more than the minimum payment per month.

Otherwise, you can take decades to pay the card up and end up paying more in interest.


The platform GoFundMe has gained a lot of popularity in the last few years. The idea of crowdfunding, using a large group to start a business, is clever but isn’t without its issues.

For one, crowdfunding sites usually take a percentage of the money raised. That means the business has to give up money they haven’t had a chance to use yet.

Second, you only receive the amount of money you ask for if you reach your financial goal. Let’s say you’re starting a business and need to raise $70,000 to cover expenses.

If you made $69,500 that money would go back into the funders bank accounts and you wouldn’t see a dime.

Since crowdfunding became so popular, business owners are creating incentives for their lenders. If you invest this amount of money, you get early access to the product, a sticker, a share, ETC.

This means more work for your marketing team, but it also leads to earlier sales.

Home Equity Line of Credit

Do you own your own home? How about putting it on the line, for the bank to own if the business fails. That’s essentially what you’re doing with a home equity line of credit.

Your home is your collateral for the bank, which you give them in exchange for money. You sign over your home, which the bank will own if you can’t pay them back.

Obviously, a home equity line of credit isn’t the first option you want to explore. It’s high risk and can leave you homeless.

Try to avoid using home equity lines of credit unless you absolutely need them.

Small Business Funding Options

Which of the small business funding options above sound right for you and your business? They all have their advantages and disadvantages, like anything in life.

If you have a financial advisor on your business development team, talk over your funding options with them. They’ll know your niche and business better than an article online or someone in a bank.

Make sure you have a business plan before you apply for any funding and don’t forget to save money for marketing. So many small businesses don’t leave enough to advertise their opening.

That’s our advice on business funding. We have advice, tips, and articles on other subjects, which we’re always expanding on. Take a glance and come by the blog.


You won’t regret it.

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