A Complete Guide to Small Business Funding

Securing small business funding is critical for entrepreneurs looking to expand their ventures. Access to capital can fuel growth, increase profitability, and offer strategic advantages in competitive markets. Whether you're aiming to drive more traffic to your store, purchase additional inventory, or prepare your business for an exit, the right funding solution can help you achieve your goals. In today’s business environment, securing funding is not just a necessity; it’s a vital tool for businesses to thrive.

How Can Debt Help Grow Your Business?

Debt can play a crucial role in the growth of a small business by providing the working capital needed to scale effectively. The ability to access capital when required can help businesses maintain momentum, invest in key areas, and expand without straining cash flow.

1. Drive More Traffic to Your Store

Increasing your marketing budget is one of the most effective ways to drive traffic to your store and build brand awareness. By utilizing low-cost debt, businesses can allocate more resources to digital marketing, social media campaigns, and broader brand-building initiatives. Expanding beyond Amazon to other marketing channels or even scaling your global presence can be achieved with the right funding in place.

2. Purchase More Inventory

One of the biggest challenges for growing businesses is having cash tied up in inventory. This can create a bottleneck, limiting your ability to scale operations. Small business funding options, like inventory financing, can help you continue scaling without being hamstrung by supply chain cycles. Low-cost debt solutions ensure that you can purchase more inventory, fulfill orders, and meet demand without cash flow disruptions.

3. Increase Profitability (for an Exit)

Preparing for a business exit often requires growing profitability to hit the valuation you are seeking. Strategic funding solutions, such as term loans or SBA loans, provide longer-term, lower-cost options to help businesses ramp up growth. By leveraging debt effectively, you can increase profitability while preparing your business for an eventual sale or exit.

Key Small Business Funding Solutions

There are several funding options available, each tailored to meet different business needs. Understanding the pros and cons of each can help you determine which option is right for your company’s specific growth objectives.

1. Revenue-Based Financing

Revenue-based financing is a popular option for small businesses looking for quick access to capital. In this model, the finance company purchases a portion of the business's future sales at a discounted rate. Repayment is made as a percentage of sales, which makes this option particularly attractive for seasonal businesses or companies with fluctuating revenue.

• Pros:
  • No additional collateral is required, as inventory serves as collateral.
  • Flexible repayment options offer deferred payments, making it easier to manage cash flow.
  • Repayment as a percentage of sales can be ideal for businesses with seasonal demand.
    
    
• Cons:
  • Extended periods of slow growth can put pressure on cash flow.
  • The calculated APR can exceed 20-30%, which may be expensive for some businesses.
    
    

Revenue-based financing is a great option for small businesses in need of quick access to capital, particularly those experiencing rapid growth or operating in heavily seasonal industries. This type of funding is usually approved in just 2-3 days, making it a convenient choice for businesses needing immediate financing.

2. Small Business and SBA Loans

Small Business Loans (including SBA loans) offer more traditional financing options with structured repayment terms and competitive interest rates. SBA loans, backed by the Small Business Administration, are often used by businesses looking for long-term financing solutions.

• Pros:
  • Repayment terms can extend up to 10 years, providing flexibility.
  • Competitive, fixed interest rates make this a more affordable option.
  • There are no prepayment penalties, allowing businesses to pay off the loan early if possible.
    
    
• Cons:
  • SBA loans typically require strong personal and business credit.
  • A personal guarantee is usually needed, and the loan may be secured by both business and personal assets.
  • Businesses may need to demonstrate profitability or significant cash runway to qualify.
    
    

Small Business Loans and SBA Loans are excellent options for businesses seeking longer-term growth strategies and stable funding solutions. These loans can range from $50k to $10mm, making them suitable for businesses at various stages of growth.

3. Inventory Financing

Inventory financing enables businesses to borrow against their existing inventory, finance new orders, or access more flexible credit options for placing large orders. This type of financing is particularly beneficial for businesses with high inventory costs or those looking to scale quickly without tying up capital.

• Pros:
  • Businesses can leverage existing inventory as collateral to access funding.
  • This option provides flexibility, allowing for the purchase of additional inventory without impacting cash flow.
    
    
• Cons:
  • Inventory financing may not be ideal for businesses in industries where inventory could expire, such as food or beverages.
  • The cost of this financing can be higher than other small business funding options.
  • It’s less suitable for companies with unpredictable sales cycles, as slow periods can create repayment challenges.

Leverage Funding for Small Business Growth

Securing the right type of small business funding is key to unlocking growth opportunities. Whether you’re expanding your marketing efforts, scaling inventory, or preparing for a profitable exit, the right funding solution can make all the difference.

At Yardline, we specialize in providing flexible and competitive financing options for businesses looking to grow. We offer the best rates and terms to meet your needs, from revenue-based financing to SBA loans, inventory financing, and more. Apply for funding today and get approved in as fast as 24 hours.  Don’t wait—take the next step to grow your business. Apply for funding with Yardline today and afford all that you need to help your small business grow!