Top Financing Options for Small Business

By  //  May 10, 2021

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Getting your small business off the ground can prove to be more challenging than it seems. If you’re a small business owner, you know exactly what we’re talking about. More often than not, the problem lies in the lack of funding, which has left many businesses unsuccessful, even though they were promising.

To prevent this from happening to your company, here are top financing options for your small business, to better help you get the money you need to make your small business develop, and ultimately to grow it to its full extent.

CDFIs

CDFI or community development finance institutions can be found all over the country since there are so many of them, and all of them provide capital to small businesses and microbusiness owners on reasonable terms, as many experts note.

Furthermore, people who are a part of CFDI note that there is a wide variety of applications for loans that come across their desk every week, many of whom are from ambitious startups. CFDI usually considers themselves to be mission-oriented non-bank lenders, who know that many viable small businesses struggle to access the capital needed to get started, and ultimately thrive and grow. 

Lenders like CEI differ from lenders like banks in a few ways. Firstly, many lenders will look for a certain credit score, which rules out a lot of startups right in the beginning. If banks see poor credit scores, the business will almost indefinitely end up in the rejected pile.

CFDI lenders also look at credit scores, but in a quite different way. They look for borrowers who’ve been fiscally responsible with the utmost understanding that unfortunate things happen to good people and their business. For instance, they seek to understand what happened and assess how relevant it is. Things like personal or family medical issues and job losses can be explained and the loan is more likely to happen.

Grants

In simple terms – grants give you free money. The truth is that almost anyone can apply for a grant but very few get them so expect to have plenty of competition. Secondly, getting a grant can take a while, for even months because your business will have to jump through all hoops and get funding.

Business grants oftentimes have very detailed application processes that may but almost always include the following: making videos, writing essays, and participating in interviews. Many grants accept applications only during a very brief annual window which will make you wait for a while.

Grant money is entirely yours to use and you never have to repay it. To stand a better chance of getting a grant for a small business you need to research them thoroughly and see which ones you qualify for. If you fit a narrow description the best, the chances are higher you will get it.

In some instances, grants are awarded for specific groups or businesses. Some of the examples of these grants include grants for businesses that are women-owned, minority-owned, and for veteran-owned businesses. The competition is less daunting under these circumstances so make sure you know if you qualify for them.

Small business loans

If your small business doesn’t meet the strict eligibility criteria that banks traditionally impose, there are still plenty of options left for you. One of them includes SBA (Small Business Administration) loans that are perfect for this occasion.

The U.S. Small Business Administration offers lenders (usually traditional banks) a federal guarantee on their loan. This way, the banks take up a smaller risk to lend you the funds your small business needs to kick-off, grow and become successful. In addition to banks, SBA works towards finding you other lenders thus making the chances of getting a loan for your small business even higher.

Small business loans are a very important factor in the success of your company, which is why it’s crucial to have a clear comparison of financing options. A detailed review of Small Business Loans with Nav shows the types of financing options, what they are best for, estimated APR, and required credit score for them. This is quite a convenient way to review all your options, as well as to figure out for what kind of financing options your small business qualifies for, and ultimately, how much you can expect to be awarded.

Crowdfunding

Crowdfunding is another among the top financing options for small businesses. It’s best for small businesses with products that can capture the public’s interests.

Crowdfunding works pretty simply – there are crowdfunding sites such as Indiegogo and Kickstarter that rely on investors to help a small business off the ground by rewarding them with perks or equity in exchange for cash. Although these sites have become very popular in recent years, there are still caveats. Your product or company has to be intriguing to some extent to catch the eye of multiple investors.

In the case of equity crowdfunding, meaning the investors gain a stake in the company, there are more strict securities laws and rules to follow. This is why it’s extremely important to read the fine print many times before choosing the platform to use, and the added options.

Some platforms might have payment-processing fees or they might require businesses to raise their full financial goal to keep any of the money raised, which can be quite tricky. A very famous example of crowdfunding might be the reality show “Shark Tank” where few successful people listen to the pitches of small business owners and offer cash to help them out in exchange for equity (mostly). 

These four financing options are among the top financing options for small businesses especially. They all offer unique benefits, and all have different loops to jump through. Ultimately, it will all be worth the hassle and paperwork because you will get your business off the ground and make it more successful.

If you’re still unclear about what option is best for you and which one you qualify for, look for reviews from experts on the matter which can make these comparisons quite simple and easy to understand.

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