21 Small Business Financing Options For Raising Funds In 2019
Small business owners are constantly in search of new opportunities to raise funds for business growth and expansion.
This funds can be channeled int0 to seeking new office space, acquiring a competitor or purchasing new equipment.
Regardless of the reason, it’s good to know that there are alternative small business financing options to consider outside of a bank loan.
Before you can raise funds for your business, you need a good business idea or a thriving existing business.
You also need a good business plan that clearly states how you plan to utilize the funds when made available.
Partnerships find it easier to raise funds quickly compared to sole proprietorships. The reason is farfetched.
It is also important to have good business credit although it is still possible for businesses with bad credit to raise funds.
Despite the small business financing options that will be made available in this post, here is the way to go when raising capital for your business:
Step 1: Decide exactly how much money you need for your business or idea.
Step 2: Note the different types and sources of funding available to you.
Step 3: Decide what source of funding is the right fit for your situation.
Step 4: Find the best source of funding which matches your needs.
Step 5: Put together a deal that makes sense for you today and down the road.
Now that you are ready to raise funds for your business, we’re sharing 21 of the best financing options for small businesses.
Table of Contents
YOUR TOP Financing Options
1) Personal Savings
Personal savings is the most common way to fund a new small business.
However, not everyone has the means to do so, and even if a business is running smoothly, running out of capital can cripple it.
At some point, other options will be necessary for most small business owners.
2) Friends and Family
Securing a loan for a small business is difficult, especially for those with challenged credit, and for startups.
For this reason, friends and family are often one of the first places entrepreneurs turn to for capital.
If you find someone who believes in your business and your ideas, this option can provide a good amount of flexibility in terms of paying back the loan, and in terms of interest rates (or lack thereof).
This is one of the most common ways people start their business, but is not available to most, and is not always recommended due to the personal entanglements it may entail.
3) Credit Cards
Credit cards are a common and flexible way to secure financing for a business.
While interest rates are high, this option is readily available to small business owners.
4) Angel Investors
Angel investors invest in start-up or early stage companies.
They typically do this in exchange for a 20-25 percent return on their investment, which is a hefty fee compared to other options.
However, they can provide large amounts of capital for a promising business, and have funded behemoth companies like Costco and Google.
5) Venture Capital
This option is available to businesses with high-growth yet high-risk potential. Capital amounts can be large, but venture
capitalists often prefer to have a role in the business strategy, and they look to recover their investment in 3-5 years.
Sites like Kickstarter and Indiegogo have become popular in recent years.
This option gives businesses the opportunity to pool funding from multiple small investors.
However, there are usually processing fees and other stipulations involved.
Grants are an option for certain types of businesses, though they are difficult to secure.
Usually, grants are focused on businesses that specialize in science or other types of research, with commercial potential.
Recipients are required to meet particular goals throughout the grant period.
8) Small Business Administration 7(a) Loans
The SBA is the primary lender for small businesses across the country.
Every entrepreneur should be familiar with the SBA and its programs, as it has numerous resources, often free, to help every business get off the ground.
This includes free training programs, networking resources, access to capital, and more.
The SBA should be the first source every entrepreneur looks to for small business financing options.
While it isn’t always easy to secure a loan through the SBA, with their rigorous application process, the rates are low compared to what you’d find at a bank.
In addition, some types of businesses are excluded, and it can sometimes take months to receive funding. Loans from the SBA are available up to $5 million.
The most common type of SBA loan is a 7(a) loan, which helps start-up and existing small businesses.
The loans don’t come from the SBA itself but through partner lending institutions.
The SBA guarantees the loans and will direct small business owners to the institutions that offer them.
9) SBA CDC/504 Loans
These loans are procured through a Certified Development Company (CDC), which are non-profit corporations devised to enable the economic development of their communities.
CDC/504 loans are available nationwide. The CDC/504 Loan Program helps growing businesses secure long-term, fixed-rate financing.
It covers major assets like physical structures and land. The borrower is required to contribute at least 10% equity for these types of loans.
10) SBA Express Loans
This type of SBA loan is favorable due to the fast turnaround time.
A response to a loan application is promised within 36 hours, which is much quicker than other types of SBA loans.
This type of loan is guaranteed by the SBA at 50%, and the interest rate is negotiated between borrowers and lenders, and are tied to the prime rate stated in the Wall Street Journal.
Lenders can charge up to 6.5% over the base rate for loans of $50,000 or less, and up to 4.5% over the base rate for loans over $50,000.
Terms can last up to seven years, and collateral is not required for loans up to $25,000.
This option provides small business loans for working capital.
They offer loans up to $500,000 and lines of credit up to $100,000.
The application is online, is easy, and a decision will come within minutes. Funding can be as fast as one business day if approved.
They base their underwriting on cash flow, in addition to business and personal credit.
Accion is a non-profit microlender offering loans from $500 to $50,000, and SBA-backed Community Advantage loans up to $250,000, depending on the state.
While their interest rates may be higher than some, their turnaround time is relatively quick, and each business is paired with a Loan Officer that can offer technical assistance on things like accounting and formalization throughout the life of the loan.
Their mission is “to empower low-to-moderate small business owners through access to capital and financial education.”
13) RapidAdvance Small Business Loans
This company offers financing options from $5,000 to $500,000, with approval coming in as little as 24 hours.
14) Grameen America
Grameen America is another non-profit lender with roots tracing back to Bangladesh, where Nobel-prize winner Muhammad Yunus pioneered microfinance for the poor.
These loans are available to women only and focus on women living in poverty in the United States.
The maximum first loan is $1,500 and is always paired with financial education.
This option can be secured in as little as 24 hours.
Loans from $3,000 to $1,000,000 are available, and terms range from three months to ten years.
16) Kabbage Small Business Loans
This company provides lines of credit in amounts of $2,000 to $100,000 and a decision can be made in just a few minutes.
This is a flexible option and there are no fees required to establish the line of credit.
17) SmartBiz SBA Loans
These SBA-backed loans range in amounts from $50,000 to $350,000 and offer relatively low-interest rates.
The loans can be used for working capital, refinancing existing loans, cash advances, or to purchase equipment.
18) Funding Circle Small Business Term Loan
These loans entail an affordable APR with no hidden fees, and range from $25,000 to $500,000, with terms between 1-5 years.
The application is online and fast.
19) Tiger Funding
This cash advance option requires the business to have at least $10,000 in bank deposits every month, and it must have been open for at least six months.
Their underwriting guidelines are based on business income, not personal credit rating, which can make this a solid option for those with limited credit.
20) Skycap Funding
Skycap Funding provides small business financing options in amounts of $2,500 to $500,000.
Pre-approval is instant, with minimal paperwork, flexible repayment options, and no collateral required.
While Fundera doesn’t directly provide loans, it is one of the first sources small business owners should turn to in order to see what their options are.
A simple questionnaire is required, and then the online site will provide a list of all the options that are available.
Finding the best financing options for your business:
These 21 financing options for small businesses are among the best available.
Once you understand the eligibility requirements of each method, along with the pros and cons, you can decide which path to follow.
Keep in mind that you have to consider other things like your payback strength, how urgent you need the funding, and the optimum amount to keep your business rolling.
Answering these questions will help you decide the best small business financing option to opt for.