5 Popular Small Business Financing Options

Running a small business comes with unique challenges, and financing is one of them. Here are some of the most popular sources to consider when it comes to funding along with pros and cons.


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Personal Loans From Family and Friends

One of the most accessible options is borrowing funds from family and friends. If you approach the process in a professional manner, you’ll see the benefits of “lenders” who are already familiar with you and your business story. Because of your close relationships, you won’t have to demonstrate your trustworthiness and your ability to see your promises through.

Provide an organized business plan describing how you’ll use the funds to help your company grow. Make sure to follow through with documentation rather than relying on informal agreements. Keep in mind that entering into this kind of financial partnership can put personal relationships at risk and may also adversely affect your ability to access other kinds of loans. 

Find personal loans and other reliable types of financing here: 5 Safe Funding Options for Your Small Business.


A resource that’s becoming increasingly popular for initial financing is crowdfunding, through sites like Kickstarter and Indiegogo. This strategy relies on many smaller investments, whether it’s a few dollars or a few hundred dollars. It’s up to individuals to decide how much to contribute based on your pitch.

If all goes well, not only will you receive the funds you need, but you’ll also build a loyal customer base. You’ll need to prepare in advance of the launch, building up a strong community and spreading the word far and wide. Set your goal amounts as low as possible so you can exceed them. The contributions you collect can serve as an example of social proof, influencing potential donors to support your cause as well.

While there are some attractive benefits of crowdfunding for your business, be wary of the disadvantages. Find out why it can be a risky choice here: Reasons to Avoid Small Business Crowdfunding.

Business Credit Cards

Getting a credit card can be a flexible option when it comes to financing your small business if used correctly. Because they are a revolving line of credit, you can continue borrowing without depleting your available funds. In addition, they offer discounts and rewards for spending. With your credit card, you can also take out a cash advance, a type of short-term loan that allows you to withdraw cash which you then repay with interest. Learn how you can benefit from a business credit card.

At the same time, be sure to review terms and conditions carefully. Understand and prepare for payments and adverse consequences if you are unable to meet your obligations. If you’re the sole proprietor of your business, your personal credit score will be impacted by late payments.   

Term Loans

Term loans a common source of funds that entrepreneurs use to develop their small businesses. The idea’s simple enough: you borrow capital and then repay with interest on a regular basis. But it can start getting more complex once all the factors are considered.

These loans are typically differentiated most commonly into three categories, specified by their terms.

The first is short-term loans with terms that range from a few weeks to no longer than a few years. These fast funds can be useful in times of emergency because most businesses are eligible to receive their deposit very quickly. However, don’t look past the fact that these accessible funds come at a steep price. Their high interest rates and frequent payments can actually cause more harm than good to your business cash flow.

Medium-term loans typically have a life of several years and are mostly offered by traditional bank lenders. You’ll probably find that they’re more affordable since they have lower rates and monthly payments, but also come with more eligibility requirements and slower time to funding.

Finally, long-term loans provide you with the most sustainable option. Because they last the longest, the amount owed can be spread out into smaller monthly payments with lower interest rates, reducing negative impact on monthly cash flow.

SBA Loans

An SBA loan is a type of long-term loan secured, in part, by the US Small Business Administration. The agency makes a guarantee to the bank that it will cover a percentage of your desired loan amount if you can’t make your payments. This is a win-win for small business owners and lenders: you benefit from low rates and long terms, while lenders have the advantage of additional support from the government.

Until recently, the main concern that borrowers faced when it came to applying for an SBA loan was that the process was lengthy and complicated. That’s why SmartBiz helps match you with the lender that’s most likely to approve your application. You’ll get the funds you deserve through a quick, affordable, and transparent process. If you have your paperwork ready to go, you can progress through the application process and get approved for funding swiftly.

See if you prequalify in 5 minutes and start your SBA loan application through SmartBiz today! Learn more about SBA loans here.


 What you need to know: The information provided through this article is for educational purposes only. Use of this information is not a replacement for personal, professional advice or assistance regarding your finances or credit history.