How & Where To Find Funding For Your Small Business

If you’re considering seeking out some cash to maintain or grow your small business – or maybe to finance specific company needs – you’ll find options that range from bank loans to grants, as well as untraditional paths.

Here are a few of the resource options for pursuing more funding for your small business.

Grants

Some nonprofits, corporations, and state and local governments offer grants to small businesses – which can mean no-cost funding.

There are economic development grant opportunities, and those that focus on specific types of small business owners, such as women, veterans or minorities. 

Check with your city and state governments to see what grants they offer to small businesses and what you might qualify for.

Also, the U.S. Small Business Administration (SBA) works with different organizations to provide federal financial assistance through grants and “cooperative agreements.”

Trends in Small Business Loans

More than 3 in 5 (61 %) of U.S. small business owners have applied for a loan for their business, reports a study released in 2019 by Intuit and Wakefield Research, which surveyed 3,000 small business owners about cash flow. 

Of the 39 percent of U.S. small business owners who said they hadn’t applied for loans – 29 percent pointed to high interest rates as the reason, 23 percent didn’t want to make payments, and 19 percent thought they would be rejected.

The Intuit study said business owners who work for themselves (no employees) are more likely (71%) than those with 1-49 employees (39%) and those with 50 or more employees (27%) to have never applied for a loan for their company. 

Traditional loans

A traditional bank loan is a good option for small businesses that are established and have strong credit. And sometimes the best resource for that loan is a locally owned bank.

The FDIC said 43 percent of small loans to businesses came from community banks. A community bank, vs. a large corporate-owned bank, is more apt to make a loan to your small business because of their interest in economic development in your town or city. 

“Even if your business doesn’t have a strong enough track record or enough assets as collateral to qualify for a bank loan, talking to someone at a traditional bank can help you figure out what documents you need and what your best options may be,” writes Jackie Zimmerman for NerdWallet.

You may find a viable bank loan option through the SBA – the agency works with lenders, mostly traditional banks, to provide a federal guarantee on your loan, making it less risky for banks to lend you the funds you need. 

Alternative Routes

Getting a business loan through your bank can be a daunting process and it may result in rejection.

“When this happens, many businesses look for alternative avenues to fundraising,” writes Sarah Austin, a four-time venture-backed entrepreneur from the Silicon Valley, in an article in Entrepreneur.

Crowdfunding and so on

Crowdfunding – the process of gathering funds through philanthropic small time supporters – has become a popular option for startups and small businesses.

Some small businesses turn to this method if they’re an established local brand or their product has become a mainstay in a community, or popular with consumers in a niche market.

Another style of microlending comes via online lending platforms like Kiva or Accion, which connects online lenders to entrepreneurs.

“This provides a sort of symbiotic relationship that brings benefits on both sides,” Austin writes. “While not for businesses with substantial needs, these micro-lenders offer lower rates than traditional loans, and smaller price tags than legacy venture capital.” 

Peer to Peer Financing

An online lender could be a good option for your small business loan if you struggle with bad credit or need some cash fast. Among the most popular online financing options for small businesses are peer to peer lenders or P2Ps.

P2Ps, such as Funding Circle, Lending Club and StreetShares, don’t fund your loan directly but underwrite borrowers. They work as an intermediary between you – the small business owner – and the individual investor or institutional investor, such as a hedge fund or investment bank.