$25,000 – $500,000
1 – 5 Years
$5,000 – $300,000
4 – 24 Months
$5,000 – $100,000
1 – 2 Years
Up to $250,000
Up to $200,000
1 – 12 Months
Actual offers vary based on your application information and lender.
What Is Business Financing?
Business financing involves securing funds to launch or expand a business. For small business owners and startups, there are a variety of ways to get the working capital they need.
As with any funding source, it’s important to weigh all the options and read the fine print carefully. Watch for any hidden fees that might be included, along with whatever demands the lender or investor might make: whether it involves revenues, a stake in the company itself or any ownership rights to what the company produces. You might also check with an accountant or tax attorney to see what expenses or interest payments may be tax deductible.
How Do I Get Business Financing?
Friends and Family
While discussing money can be a touchy subject, someone launching or expanding a business might find eager investors among their friends and relations. They’ll probably ask for less documentation than a bank or similar lender.
It could be a good idea to put everything in writing and perhaps have a lawyer look over the document so that everyone knows what they’re getting into. A “handshake deal” might seem like a good idea with an old friend or family member, but memories may fade or change over time — especially when money is involved.
Such a document might include the amount of money borrowed, any stake in the business or profits offered by the owner, or the interest and payments to be made to the lender.
Banks and Credit Unions
Someone who has an established relationship with a bank or credit union might find this a useful option. A bank will likely want to see some tangible assets of some kind.
One potential benefit is that the interest payments on a business financing loan from a bank or credit union can be tax deductible — though it may be worth checking with an accountant or tax preparer to make sure.
Securing funding from a venture capitalist offers two benefits: money and advice. Venture capitalists tend to work within certain fields (technology and alternative energy being two obvious examples). This gives them valuable insight and knowledge they can provide to any company they’re willing to invest in.
Paying for bills with a business credit card can be a fast and easy way of financing a business, especially in the early days of a company when a business may lack the assets to secure funding through other means.
The upside is that it’s fast and easy to just put the bills on the plastic, and it offers flexibility in making payments. A business owner could just make the minimum payments until the revenues get flowing.
The downside is that credit cards can have a higher interest rate than other forms of business financing. The cost of “putting it on the card” may add up quickly if expenses are high and revenues insufficient to make more than the minimum payment.
Selling a product before it’s available can provide the financing needed to develop the item and get it into the hands of customers. It can also help create “buzz” around a new product if enough people are talking about it on social media and telling their friends.
A successful presale can also prove there’s demand for a product, attracting investors willing to provide additional funds to the business.
Crowdfunding websites allow small business owners to seek funding online through a variety of investors. Business owners provide information about themselves and the services or products they intend to provide, letting investors choose whether they want to invest and the amount they wish to provide.
A crowdfunding site may allow a business owner to offer presales to any would-be investors to attract funding, or offer a deal on services.
As with presales, the crowdfunding alternative might provide more than just financing. If it attracts enough attention from would-be investors, it can create a “buzz” around a new business that may help attract other investors and potential customers.
Be sure to check the details on what each site offers. A site might allow a business owner to tap into funds as they’re provided, or it may require the entire funding goal to be met before releasing these funds to the borrower.
Sites will likely charge a fee, consisting of a percentage of whatever is raised, and may charge an additional fee for transferring funds.
Vendors and Suppliers
The Small Business Administration offers grants and government-backed loans for small business financing. The grant-approval process can be time-consuming and rather strenuous, with applicants required to meet certain goals and demonstrate potential commercial interest in their service or product.
Vendors and Suppliers
A business that already has an established relationship with its vendors and suppliers might be able to work out a financing arrangement with them, such as an advance on future payments to the company. The company’s vendors and suppliers have a vested interest in seeing the company grow and in maintaining a good business relationship.
State and Local Governments
State and Local Governments
Local and state development agencies might offer favorable loans to a new or expanding business. Even if a business can’t obtain all the funding it needs, simply getting an initial loan might help in securing funds from other sources.
A similar option exists in locations with a Tax Increment Financing District. Such TIF districts are created to encourage growth, often in underdeveloped areas. A local TIF district might be willing to help by subsidizing a land purchase or helping with construction and other development costs.
Online lenders are a rapidly growing trend for a variety of reasons. For those seeking business financing, an online lender offers a relatively quick application and approval process without having to visit a bank or credit union.
What The Business Backer Provides
The Business Backer has offered advice and customized business funding solutions since 2007. We offer a fast and simple application process, and you may receive funds in as little as 48 hours.
If you need financing for a one-time project, ongoing funding requirements or an equipment lease, we can help you find the funding option that fits your business’ short-term and long-term goals. Apply now or speak to a Funding Advisor today!