How to Get Funding for a Small Business

Finding the right funding source can be a turning point for small businesses. Whether you’re launching a new product, expanding your services, or simply trying to stabilize cash flow, the right financial support can help take your business to the next level. In this article, we’ll explore various funding options, helping you decide whether crowdfunding, debt financing, equity investment, or bootstrapping is best for your needs. We’ll also highlight some of the best debt financing options available for small businesses, including business credit cards, revenue-based financing, asset-based loans, and traditional lending. Plus, we’ll explain how Yardline can be a vital partner in your business’s growth.

1. Decide Which Funding is Right for You

There are several ways to fund your business, each with its pros and cons. Understanding the best fit for your needs is critical for long-term success. Below we'll dive into some of the main ways in which people fund their business:

• Crowdfunding: This is ideal if you have an innovative product or service that generates excitement. Platforms like Kickstarter or Indiegogo allow you to raise funds from the public, often in exchange for early product releases or other rewards. Crowdfunding works best for companies with a consumer focus and a loyal community willing to back new ideas.

• Debt Financing: This involves borrowing money and repaying it over time, typically with interest. It's suitable for businesses with steady cash flow but limited capital. Debt financing keeps you in full control of your company because you’re not giving up any equity in exchange for the funding.

• Equity: In exchange for funding, investors take a share of ownership in your business. This option might be appealing if you need a large sum of money and are open to sharing profits with investors. The downside? You lose a portion of control in decision-making.

• Bootstrapping: Using personal savings or revenue generated by the business to fund growth is often the least risky, especially for small businesses. However, it may limit how fast or extensively you can expand since you’re relying solely on internal resources.

2. Best Debt Financing for Small Businesses

Debt financing can be an excellent way for small businesses to access the capital they need without giving up control of their company. Below are some of the best debt financing options available, tailored to different business needs, with their associated pros and cons.

Business Credit Cards

Perfect for: Small, recurring expenses and managing cash flow for day-to-day operations.

Pros:

• Easy approval process, especially for businesses with a good credit history.
• Some offer rewards programs, such as cashback or travel points, which can add value.
• Flexibility to spend as needed, with revolving credit up to a limit.
  
  

Cons:

• High interest rates if you don’t pay off the balance each month.
• Limited to relatively small credit limits, which may not be sufficient for large purchases or significant investments.
  
  

Best used for: Covering smaller operational costs like office supplies, travel, or marketing expenses, especially if you can pay off the balance quickly and avoid accumulating interest.

Revenue-Based Financing and Merchant Cash Advances (MCAs)

Perfect for: Businesses with fluctuating or seasonal revenue, like retail or e-commerce companies, that need quick capital but want flexible repayment options tied to their income.

Pros:

• Fast access to capital, sometimes in as little as 24-48 hours.
• Repayments are tied to your business’s daily sales, meaning you pay more when business is good and less when it’s slow.
  
  

Cons:

• Can be more expensive than traditional loans, with higher interest rates or fees.
• Frequent repayments can strain your cash flow, particularly during slow sales periods.
  
  

Best used for: Seasonal businesses or companies with irregular revenue patterns that need fast funding to cover immediate costs, such as inventory or marketing for a big sales push.

Asset-Based Loans (Inventory Financing and Invoice Factoring)

Perfect for: Businesses that need short-term cash flow but have valuable assets like inventory or accounts receivable that can be used as collateral.

• Inventory Financing: This allows you to borrow against the value of your current stock. It’s useful for companies with a large amount of unsold inventory that still need cash to cover other operating costs.

• Invoice Factoring: This involves selling your unpaid invoices to a lender at a discount in exchange for immediate cash. It’s ideal for businesses that offer terms on invoices and are waiting for payment but need funds now.

Pros:

• Can provide larger loan amounts because the loan is secured by assets.
• Quick access to cash without waiting for inventory to sell or invoices to be paid.
  
  

Cons:

• Interest rates can be higher, especially if your assets are deemed risky or fluctuate in value.
• If you fail to repay, the lender can seize your assets, which may disrupt your business.
  
  

Best used for: Businesses with significant assets or unpaid invoices who need immediate liquidity to cover operational expenses, purchase more inventory, or meet payroll.

Traditional Lending (Small Business Loans, Revolving Lines of Credit, and SBA Loans)

Perfect for: Established businesses with stable cash flow and good credit history looking for longer-term financing at lower interest rates.

• Small Business Loans: Fixed-term loans where you receive a lump sum upfront and repay over time with interest. Great for financing major purchases or expansions.

• Revolving Lines of Credit: Like a credit card, you’re approved for a credit limit, and you can borrow and repay as needed, only paying interest on the amount you use. This offers flexibility for managing working capital or unexpected expenses.

• SBA Loans: Loans partially guaranteed by the U.S. Small Business Administration, offering lower interest rates and longer repayment terms. These are ideal for businesses that meet specific criteria and want the security of government backing.

Pros:

• Traditional loans often have lower interest rates compared to other forms of debt financing.
• Predictable repayment schedules for fixed-term loans make budgeting easier.
• SBA loans provide favorable terms and are often easier to qualify for if you don’t have a perfect credit score.
  
  

Cons:

• Lengthy approval process, requiring extensive paperwork and strong financial history.
• Collateral may be required, which can be risky if the business defaults on the loan.
  
  

Best used for: Long-term projects like expansion, large equipment purchases, or renovations. SBA loans are particularly beneficial for businesses seeking low-interest, long-term financing.

3. Apply for Funding with Yardline and Watch Your Business Grow

Yardline offers flexible, fast, and reliable funding options to help your business thrive. Whether you’re interested in revenue-based financing or need a more structured loan option, Yardline has you covered. With competitive rates and fast approval times, businesses can access the capital they need in as little as 24 hours.

Yardline provides some of the best rates and terms available for small businesses looking to scale up. Apply for funding today  and get the financial support you need to grow your business.