Top Business Financing Options for Small Businesses

More than 60% of small businesses struggle with cash flow issues.

As a result, nearly a third of all small business owners struggle to pay vendors, employees, or themselves.

When unexpected and uncontrollable setbacks like recessions, pandemics, or natural disasters occur, the need for a cash flow safety net becomes even more critical.

Cash flow issues and running out of cash are two of the top reasons small businesses fail.

This isn’t something you can easily predict in your business plan.

Don’t let this happen to you.

There are many resources available to help small business owners with business finances. And small business loans are just the tip of the iceberg.

So, whether you’re just starting a business or growing an existing business, let’s look at your options for small business financing. After all, your business plan must include ways you plan to finance your business.

1. Business loans

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Let’s start with the financing option everyone already knows – the small business loan.

A business loan means borrowing money from a bank or other lender and then paying that money back over time with interest.

But, what you may not know is that business loans come in many varieties.

There are general business loans like SBA (Small Business Administration), micro-loans, short-term loans, term loans, business term loans, and merchant cash advances. Then there are ultra-specific loans like equipment financing, PPP (Paycheck Protection Program) loans, accounts receivable financing, and commercial mortgages.

Loans are available with short and long repayment terms for huge and tiny amounts. Some have particular parameters for their use, while other loans are jacks of all trades that can be applied to any financial need for your business.

The point is that the humble old business loan is a diverse tool that can help many small businesses. You’ll want to take the time to research the loan terms, the loan company, and the application process before determining if any loan is a good fit for your business’s needs.

Remember that banks will check your personal credit score for a business loan, so make sure the credit score is sufficiently high to qualify for a business loan.

2. Business grants

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Business grants are similar to loans in that an organization gives you money for your business.

But, grants have a distinct advantage over loans as a financing option – you are not required to pay them back.

Aside from the time invested in finding the grant and writing the grant proposal or application, grants are free money you can use for your business.

And according to the experts at Finimpact So, if you’re disadvantaged in some way (logically suggesting a greater need), you stand a better chance of winning a grant.

3. Business credit cards

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Credit cards are one of the more risky – but agile – small business financing options on this list.

Grants and loans often have a lengthy application process. And there may be restrictions on how you use the money. A small business credit card can be used whenever needed and for almost any business purchase.

Credit cards are a double-edged sword – agility on one side and high-interest rates on the other. (Always negotiate the lowest interest rate you can. And take the time to shop around. It’s worth it.)

Luckily, it’s relatively easy to get a small business credit card. However, your credit history will determine the interest rate you qualify for.

4. A business line of credit

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A business line of credit is like a hybrid between a loan and a credit card.

You can access a lump sum amount with a line of credit – like a loan. But you only repay (and pay interest on) the amount you use – like a credit card.

And, as long as you pay back the line of credit according to the agreed-upon terms, you can continue to dip into that money again and again. Your line of credit remains to wait in the wings to absorb unforeseen future expenses. This is in contrast to a loan that can only be spent once.

A credit line is ideal for covering unexpected purchases beyond the scope of a small business credit card. It’s also great for helping to smooth out cash flow from month to month.

5. Crowdfunding platforms

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Crowdfunding platforms like Kickstarter and Indiegogo allow members of the public to invest money in your business. This is a newer option for business financing, and it can work well for certain types of businesses (especially businesses that create products).

Campaigns on these platforms are held for a specifically defined goal instead of just asking for money you will spend later on… something. So, if you have a specific goal that would appeal to a crowd, consider starting a crowdfunding campaign.

As loans and credit lines have unique terms and requirements, so do the various crowdfunding platforms.

6. Joint partnerships

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Unlike most small business financing options on this list, creating a joint partnership doesn’t rely on applying for money or credit. Instead, this strategy involves two complementary businesses working together to help each other.

A joint partnership occurs when two businesses temporarily join forces to share resources and achieve a common goal. Those resources may be information, audiences, finances, or products or services.

If you find your business waning, don’t overlook the possibility of forming a joint venture to help buoy your performance.

7. Finance apps

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Making the best decisions for your small business financing is hard if you don’t understand the complete picture.

That’s where finance apps can help. There are payroll, point-of-sale, accounting, and finance tracking apps that can help you manage your entire budget at the big-picture level.

Every business is unique, so we can’t tell you which apps will best fit you. But it’s worth the time to research your options and find a collection of apps that cover all of your major bases and provide you with a coherent picture of your business’s finances.

If you can integrate those apps directly or use a third-party tool like Zapier, even better.

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