7 Small Business Financing Options

Startup Fundraising Checklist

Free Startup Fundraising Checklist

8 Min Read

7 Key Funding Options
Table of Contents
Writing a business plan?

Several aspects hold primary relevance when it comes to starting a business including choosing from small business financing options. While having the setup, skills, and resources to be able to make an idea run is of great importance, how you finance your business is a concern common to all start-ups.

Typically, start-up owners tend not to have the resources to be able to fund their venture all by themselves. They tend to rely on other channels to be able to finance their endeavor, which often ends up yielding potential losses or paybacks at a later stage.

What makes business funding unique is a factor of risk.

There’s no way of telling if your venture will skyrocket to profits, or perhaps yield losses and close even before it started. This is a primary reason why start-up owners and those starting small businesses from scratch have started relying on some innovative and business-specific funding options to make the process easier for them.

Some specific businesses could rely on small business financing options meant exclusively for their niche or perhaps one that is more profitable to deal with at a later stage. While there can be several options, you can start out by deciding what would suit your business in the longer run.

Key Small Business Financing Options You can choose From:

Key financing options

To give you an overview of the Small business financing sources available out there, here are seven financing methods that you can adopt for your business according to its specific requirements:

1. Crowdfunding

Crowd Funding Startup

Crowdfunding has grown to be a reliable and convenient way of funding that has been increasingly adopted over the last couple of years. As the name suggests, crowdfunding involves creating a campaign for a crowd of contributors to donate money to fund your initiative.

This method is known to work really well, especially for ventures for the environment and other cause-based enterprises. There are other models of crowdfunding that also work for personal business ventures with the coming together of contributors.

You can rely on a reward-based crowdfunding model where certain rewards and incentives are offered to contributors. These could be in the form of discounts and vouchers for your business, small contributions, or perhaps a certain return at a later stage for higher amounts of contributions.

You can also offer a fractional share of the business to those contributing needle-moving amounts to your cause. You can also opt for an equity-driven model to allow public advertising based on the combination of provisions and regulations you want to go with.

The most significant benefit of crowdfunding is optimized rating and ranks for your product or service due to the number of people involved.

2. Love Money

Love money from family friends relatives startup

A very common option for acquiring funds for businesses and anything else for that matter is through Love Money from family and friends. There are several benefits to this.

Firstly, it is easy to get a familiar person on board with your ideas as he may lend you money.

Most likely, a familial loan doesn’t require you to pay back interest, which is greatly beneficial.

Members of your immediate family would even gift you funding without any stake in your business. The only flip side to this might be differences that arise with mixing your finances with your relations.

However, it is up to you whether the option is worth opting for or perhaps is beneficial for your business venture.

Government policies and other provisions can offer an additional benefit that you can club with the family loaned money as well.

3. Angel Investors

Angel Investors Startup Funding

Relying on accredited investors is another way you can finance your business with secure funding. Several individuals act as independent investors funding one or multiple enterprises with a high accumulation of resources to their name. They are also actively looking for opportunities to invest in high-yielding profits in the future.

Angel investors make such an investment by claiming a stake in the business in return for a significant investment.

Collaborating with Angel investors can be beneficial owing to their experience and understanding of how business financing works. Motivated by a personal benefit in your business, they are likely to provide valuable guidance for your enterprise. The only task on your part is to sell your idea to get them on board.

Try drafting a one-page business plan to highlight the main contours of your business idea to present a professional draft to the investors.

4. Bank Loans

Bank loan as startup funding option

If all else is too cumbersome, you can always rely on classic bank loans to finance your venture. Small businesses usually prefer to take a bank loan, especially when they are unable to get people on board with their idea. While it is commonly assumed that bank loans lead to irresolvable debts and financial crises, that isn’t completely true.

While recklessly obtaining loans and not paying them back can lead to such a situation. When dealt with responsibly, some great advantages and government policies can be deemed applicable through bank loans.

Some banks even offer specific advantages depending on a good business idea or plan on board. If you have a good financial track record, then acquiring a bank loan would be a cakewalk.

With a guarantee assurance, a suitable bank loan can be taken to fund your business.

5. Equipment Funding

Equipment funding for startups

A business idea with a target niche can benefit greatly from some forms of financing.

Equipment funding is one such channel through which you can acquire funds. A lot of businesses such as restaurants, factories, transportation, and others run primarily on equipment specific to their cause. Specific machinery for factories, vehicles for transportation, and other niche equipment can be obtained profitably with equipment funding loans.

In such a loan, the lender owns the equipment that is leased out to the business owner for use. A monthly, bi-annual, or any other pre-decided payment is made to the lender for the lease and using rights of the equipment.

Business equipment and machinery can be the most expensive investment for startups. Equipment funding is a good option to get started with production before you can afford your own equipment and machine requirements.

6. Microloans from Nonprofits

Micro loans from nonprofits as startup funding option

The requirement and concerns of small businesses are quite specific when it comes to their funding requirements.

Firstly, a small-scale business often lacks the potential to present valid collateral for a loan. Secondly, the funding required is much lesser than for franchises or businesses taking off on a larger scale.

Micro-loans are a great option for such businesses to cater to their financing.

In a micro-loan, a non-profit lender loans out money to a target niche of small budding businesses. While one lender might cater to production businesses, another would fund exclusively agricultural businesses. While the process remains quite similar to applying for a typical loan where credit history and other details are considered, there are several benefits of a micro-loan. Your funding will be loaned out in installments, which makes it easier to manage monthly finances. A micro-loan is easier to get without good credit or collateral to show on the books.

The community-based approach of micro-loans can suit the needs of small businesses perfectly, minimizing all other hassles.

7. Small Business Administration Loans

SBA loans as startup funding

Small Business Administration or SBA loans can offer wide-ranging funding benefits. However, you must have a good credit score. SBA loans are granted by approved intermediaries in the form of banks and community corporations. These facilitate some programs and provisions for the benefit of communities to fund start-ups and novel businesses.

These benefits can be availed only if you pass a strict qualification filter. With a decent credit score and up to twenty percent loan down payment available, you can apply for an SBA loan. If you qualify for the same, the interest benefits are truly profitable with longer repayment options available to you.

A significant sum of your finances can be optimized and redirected towards your business with a targeted Small Business Administration Loan.

With an equally difficult process as acquiring traditional loans, greater benefits can be reaped if you opt for an SBA loan.

To learn how to write a business plan for SBA. We have prepared a business plan template for SBA loans.

Summing Up

Thus, you can opt for any suitable small business financing options to fund your new start-up. While some options might be better suited than others to fund your requirements, having a clear idea of these requirements is a priority task. In order to benefit from policies, equipment assurances, and other provisions for funding, you not only need to know what you will require but also the amount of it.

Creating a requirements plan is step one to coming up with your own custom funding plan. Take a look at how to write a business plan to get started with a well-planned funding process. This can also be useful to present to investors and other concerned parties. Choose any of the above-discussed Small business financing sources to then suit your plan and fulfill all its requirements.

Build your Business Plan Faster

with step-by-step Guidance & AI Assistance.

About the Author


Sudeshna Ray

Avid writer and content marketer, Sudeshna Ray, has created content for diverse premises including technical niches, business and marketing, finances, creative character sketches, and much more. Engineer-turned-Writer-turned-Marketer, she has explored several aspects of performance, lead generation and establishing a brand presence in the digital domain.

Reach Your Goals with Accurate Planning

No Risk – Cancel at Any Time – 15 Day Money Back Guarantee