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Financing Options for Your Small Business

— March 25, 2022

The qualification requirements in most financing options are different, as well as the costs.

Starting your own company can be a daunting process, but also a rewarding one if you play your cards right. A great business plan is crucial for any business, but financing is an even more important element your company would need to succeed.

However, financing a small business or startup can be challenging, especially if you have a poor credit score. Getting a loan approved at the bank would also require you to have solid financial KPIs (key performance indicators).

Looking for financing? It’s time to read about some of the best ways to finance your small business or startup. In today’s guide, we are showing you how to obtain financing to keep your business running and be profitable in the foreseeable future.

Bank loans

Bank loans are best for established businesses that have some collateral and strong credit. Most small business owners will find this hard to achieve – however, traditional banks are often a good starting point for additional sources of capital. 

These startup loans are issued by banks – they typically have low-interest rates and competitive terms but are hard to qualify for. If you are not sure whether this is the right option for you, schedule a meeting with a consultant in your local bank to see what your best options may be.

SBA loans

Next on the list are SBA loans, which are an ideal option for businesses that don’t meet the strict lending criteria that traditional banks have. In other words, if you can’t negotiate a contract with a local bank, you can always opt-in for an SBA loan.

As to what an SBA loan is, there are several different types (SBA 7(a) loans, SBA 504 loans, microloans, etc.). A good credit score, at least two years in business, and a strong annual revenue is often needed to qualify for them. Most SBA loans are issued by banks, credit unions, and other financial institutions.

Online loans

Online loans are usually the last resort for many small businesses and aspiring entrepreneurs, but also a good option for people with shaky personal credit, or companies that need instant access to funding. Make sure to understand that these loans may often have higher interest rates. Despite that, the easy application process, quick approval, and electronic signatures put them among the most popular financing option for small businesses nowadays. 

Online lenders offer fast cash, as well as a number of small business financing options (term loans, lines of credit, invoice financing). The cost of borrowing is higher – some annual percentage rates can reach percentages as high as 100%.

Small business grants

Next on the list of financing options for small businesses are small business grants. These are a good way for business owners to grow without worrying about paying back the funds. Typically, these are offered through nonprofits, government agencies, or corporations. They can be a great financing option for startups, and businesses that can’t qualify for traditional debt financing.

The only downside is that everyone wants them – and it usually takes a lot of work to find and apply for small business grants. However, applying for multiple grants could pay off in the long run.

Credit union financing

This type of financing is not that widespread or popular among small business owners but is good for members who like a personal touch. Credit unions offer favorable rates and loans that are backed by the SBA. The number of credit unions has also risen over the years, and products like these can include lines of credit, traditional term loans, and business credit loans.

While you will likely have to be a member to qualify for financing, the nature of credit unions ties them to a community. If you are a local business, you could definitely benefit from their personal touch and put your name out there in your local community.


Woman using a laptop to look at a crowdfunding site; image by Rawpixel, via
Woman using a laptop to look at a crowdfunding site; image by Rawpixel, via

Last on our list of financing options for small businesses is crowdfunding. You’ve probably come across websites like Kickstarter and Indiegogo, where people create and start campaigns, relying on anonymous investors to help get an idea or a business off the ground. In exchange for the (financial) support, these small business or startup owners reward them with perks or equity.

The popularity of crowdfunding has increased in the past couple of years, which also gave birth to a new model called equity crowdfunding – where investors gain a stake in the company in exchange for cash.


As you could see from the list above, finding small business financing can be confusing. The good thing, however, is that there are plenty of choices when it comes to financing options. The qualification requirements in most financing options are different, as well as the costs. As a result, you need to pay attention to detail before making the right choice for your business.

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