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Effective Ways To Obtain Small Business Financing

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When you open up a small business, the obvious goal is to make money. Most businesses need startup capital to get up and running in order to properly sustain and grow their operations. In situations like this, small business financing is typically the best way to get a cash infusion to make it possible to run your company during the early growth stages.

Unfortunately, new small business owners don’t typically know about their different financing options. To help you get a better understanding of your choices, we’ll provide a breakdown of some of the ways companies typically get financing to bolster their operation:

Obtaining a Business Loan.

A business loan is most likely the obvious choice for many small business owners. In fact, it’s estimated that more than half of the existing small businesses obtain a loan from a traditional bank. So this is clearly an effective and very popular source for obtaining the financing.

On the other side of the coin, it’s not always possible for every small business to acquire a small business loan from a traditional lender. In fact, recent statistics from a nationwide review of 10,000 applications for loans discovered that 82% of these applicants were denied their small business loan from a bank.

In all, it is possible to increase your chances of obtaining a business loan. First, make sure your business credit score is strong. This has nothing to do with your personal credit score. We’re talking about your credit score for your business. The stronger it is, the better your chances will be of obtaining a loan from a traditional lender.

Second, draw up a strong business plan. In this plan, share how you run your business currently, share projections for the future and make it clear where you think your business will be in five years with expenses and even more projections shown. You need to back-up your ability to pay back the loan with the lender. The better you do this, the better your chances will be of obtaining a business loan from a traditional bank.

SBA Loans.

The Small Business Administration in the United States has a few different loans for businesses. It’s possible you’ll qualify for one or more of them. These loans are as follows:

General Small Business Loans from the SBA are the most common loan program they have. If your small business makes its debt payment obligations on time and operates at a profit, you’ll have a good chance of qualifying for this loan.

Micro loan programs from the SBA are shorter-term loans that need to be paid back within six years. They typically lend at a rate between 8% to 13% and loan up to $50,000 to the borrower. Small businesses tend to borrow this money to have capital to purchase inventory, to have working capital to run the business, to buy supplies, fixtures, and furniture with it, and to use the money to invest in equipment and machinery. On average, a micro loan from the SBA is typically around $13,000.

The SBA also offers disaster loans. If your business owns equipment, property, machinery, real estate, inventory or other assets and they were destroyed due to a disaster, you could be eligible for a disaster loan at a low interest rate. The SBA offers these loans to help businesses replace or repair destroyed assets in a disaster scenario.

Conclusion.

We’ve shared a few ways to obtain small business financing. Other potential options include asset-backed loans, crowdfunding, Prosper or Lending Club loans, and a number of other interesting opportunities. When all else fails, you can even attempt to take out small business credit cards as your final option. Just be diligent in your search to find the ideal small business financing option and you’ll get it in time.


Young Upstarts is a business and technology blog that champions new ideas, innovation and entrepreneurship. It focuses on highlighting young people and small businesses, celebrating their vision and role in changing the world with their ideas, products and services.

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