Financial Funding for Small Business: The Best Options

As the CEO of a dynamic company at the forefront of innovation and growth, I’ve navigated the complex landscape of financial funding to fuel our ambitions. “What is the Best Small Business Financial Funding?” is not just a query; it’s a pivotal exploration for entrepreneurs poised for expansion but contemplating the optimal route to secure financial support.

In this essential guide, we delve into the myriad of funding options available to small businesses, from traditional bank loans and venture capital to government grants and crowdfunding. Each avenue has unique advantages, criteria, and implications for your business’s future. The key is getting access to capital.

I aim to illuminate the pathways that align best with your business model, growth objectives, and financial needs, ensuring you make an informed decision that propels your business forward. Join us as we demystify financial funding, equipping you with the knowledge to select the best option for your small business’s success and sustainability.

What is the best small business finance funding?

Starting or running a small business requires a financial plan that supports your goals and enables you to grow continuously. In addition to the revenue your company brings in, there may be times when you need additional financial funding for your small business. Savvy owners know the financing options available, how to qualify for them, and how they can help.

Are you a complete novice when it comes to small business financing? Have you heard about a few ways to fund a business but are curious about the details? 

This post covers all significant funding options and lesser-known ones like business startup rollovers and direct public offerings.

Small business funding can help start a new venture, hire new employees, or expand an existing business. What you need will determine the financing best for your small business. Other factors, such as how much money you need, your willingness to take on debt, and so on, will also be a deciding factor.

You can get funding for your business from various places, including banks, online lenders, investors, and other unconventional sources (such as small business grants).

How Does Small Business Finance Funding Work

Owners of small businesses and franchises always deal with the unknown, but their entrepreneurial spirit helps them overcome each challenge as it arises. 

A small business owner will have to write a business plan, hire employees, taxes, licenses, and accounting, among other things.

However, the most challenging task comes before any of these: determining the best financing option. Financing can be a mountain of “what ifs” that keep you from realizing your dream of owning a business. 

Alternative lenders, like Sunwise Capital, aim to increase the number of people who succeed. As part of that mission, we believe it’s our job to help you and your business find financing options to enable you to achieve your goals.

We’ll review the basics of each funding option when it makes sense, and how to get started so you can choose wisely between investors, friends, family, bank loans, retirement rollovers, and other options.

Call us if you’d like to discuss these options with someone. 

Small business loans can help you launch a new venture or expand an existing one. Small-business loans may keep your company afloat during the coronavirus outbreak. 

Direct lenders and Small Business Administration loan programs can provide working capital loans and other financial assistance, such as the SBA Paycheck Protection Program (commonly referred to as PPP).

“Do I have what it takes to save to fund my business?” is frequently a person’s first thought. Nationwide, a survey of small business owners revealed that over half of them take cash from their personal checking and savings accounts to fund their operations. 

Is that an option for you? Is the answer is “yes?” If so, you’re in the same situation as most business owners and entrepreneurs.

The next logical step is to obtain a bank loan. Isn’t it supposed to be straightforward? Unfortunately, the answer is no: SBA loans are a great way to get money, but the rejection rate is about 70% to 80% of applications.

An entrepreneur may seek a partner or investor to provide the necessary funds. Once again, this is a viable option. Once again, success is the exception rather than the rule. After failing to find an investor, most entrepreneurs abandon their dream of owning a business. 

Unfortunately, they believe they have exhausted all their financial options and prematurely decide to return to the life they hoped to avoid.

The truth is that there are several funding options available to you and other entrepreneurs in the United States, and we’ll lay them out for you.

Small Business Finance Funding: Two Common Misconceptions

Entrepreneurs who aren’t familiar with the business financing process have two misconceptions, both of which are false. Let’s clear this up before we get into the various funding options.

Many entrepreneurs believe they should wait to think about financing until they have found their business. In reality, many funding options consider the entrepreneur’s credit and business history and those that don’t frequently require a specific amount of cash to qualify. 

Finally, selecting the “right” business does not guarantee funding, so it’s critical to start researching funding options as soon as possible.

A franchise and a sole proprietorship are different. Many entrepreneurs also believe that financing for startups and franchises differs significantly, which is true in some cases. 

On the other hand, most debt-financing options consider startups and franchise locations to be the same thing. Some options distinguish between startups and established businesses. 

The options present to the business owner are a predicate of the likelihood of success—an existing business has already proven its profitability, which can make a difference when considering debt-based financing options.

Continue reading to learn about SBA loan programs, working capital loans, real estate loans, and other small-business financing options. Learn about small business loans and how to get the best one for your startup, expansion, or maintenance.

A company’s funding determines whether it will live or die. If you have enough available cash or other liquid assets, you can expand your business, hire new employees, increase your inventory, and increase sales. When there is a lack of funds, the opposite occurs.

What exactly is the good news? A business owner can find many financing options if they know where to look.

Make a note of these when looking for funding.

WHEN GIVING UP IS NOT AN OPTION

Before finding the right fit, over a dozen publishers rejected J.K. Rowling, the best-selling Harry Potter author. Look at her now—living her dream. 

Allowing a possible rejection to deter you from achieving your goal during your financing search is a mistake. Entrepreneurs have various financing options, and we’ll help you find one that fits your needs.

Do reclaim control of your credit. Your credit score and history are taken into account by the majority of funding options. Pay off your credit cards and improve your credit score by doing so. Remember that lenders use your credit score to determine if lending you money is risky or safe.

Do keep an open eye on your finances. The value of your more significant assets, your home, your 401(k) and stock portfolio, your annual income, and other financial factors all play a role in determining what you are eligible for and what options are available. Staying on top of this data will help you determine which funding options are available.

Do make a presentation deck and a business plan. Business plans are not a requirement for all funding options. However, you should write one if you are serious about starting or buying a business. 

Having a written plan will save you time when discussing funding options that require one, and it will give you a clear picture of your goals for those that do not. Are you perplexed as to where to begin?

DON’T TAKE THE EASY WAY TO SEE WHAT HAPPENS. 

Sometimes, it’s enticing to take the easy way out; don’t do so without first determining if it is the best option for you. If you choose simple options, high interest rates can wreak havoc on your cash flow. Why would you choose that over other superior options just a few steps away?

DON’T ADD TO YOUR BALANCE SHEET MORE DEBT. 

Make no significant purchases (such as a new car, house, or boat) or apply for new credit cards until you’ve figured out how you’ll fund your company. 

If your only option for financing requires good credit, you don’t want to have several recent credit inquiries on your record from trying to secure credit cards or buying a new car.

Accepting financing without consulting a business attorney and a CPA is bad. The type of financing you obtain may influence the type of business entity you form. 

There will also be tax implications, so speak with your trusted team of professionals to ensure you’re ready to go when you launch your company. 

It’s always best to plan ahead to avoid any legal or tax surprises. Always consult your business attorney and CPA if you have questions.

Know your capabilities.

Some financing options rely on credit, while others rely on savings. Determine what you can support with your resources and ratings as the first step.

Why Would I Need Small Business Financial Funding for My Company

There are various reasons a small business, even a thriving one, may need to apply for financial funding occasionally. Some examples include launching a new product or marketing campaign, acquiring permanent real estate rather than renting a workspace, opening a new location, or building seasonal inventory. Whatever the reason, it is wise to be aware of how to obtain financial funding for small business endeavors.

To determine which type of financial funding is right for your small business, compare the terms of various options with a trusted lender. Also, consider the timeframe for repayment and how it measures up to your projections for business growth. Choose the option that best fits your company’s needs and your ability to pay off the debt in full.

What is the best Loan type for small business finance funding

Types of Loans:

Traditional Banks and Business Term Loans

A traditional lender offers a bank loan, while online loans offer more options.

A traditional bank loan or online business loan is one you are probably already familiar with. Typically, with this type of loan, you borrow a designated amount of money for a specified purpose and make predetermined payments regularly for several years. The benefits are that your payment will not change, and you may get a lower interest rate. However, with many lenders, you must have good personal credit scores and have been in business for a while.

Merchant Cash Advance

A merchant cash advance is based on your company’s future revenue via credit card sales. The lender will provide you with an advance amount to use immediately, and you will pay it back by giving them a percentage of your daily credit card sales. The amount of time it takes to pay off this type of financial funding varies depending on the sales you generate. This option may work for you if you prefer a lower payment when sales are lower.

Business Line of Credit

A business line of credit works similarly to a credit card. You will be approved for the total possible amount but charged only for the amount you actually spend. This line of credit remains open for future use as long as you have not reached the total amount available and the funds replenish as they are paid. These do not affect your personal credit, but a high credit score and good credit history are beneficial. You can often get approved quickly and qualify for a low interest rate, and this type of financial funding is often used for small business growth.

Unsecured Business Loans

With an unsecured business loan, you do not need personal guarantees, assets, or collateral. You also don’t need an amazing credit score or a long business history. You can use this type of loan for a short-term solution and a starting point for building up your business credit history.

Equipment Loans

Equipment loans are financing designed to help small businesses purchase equipment to operate and grow. These loans can be used to acquire machinery, vehicles, computers, or any other type of equipment necessary for the business.

Equipment loans typically have lower interest rates than other financing types because the purchased equipment serves as collateral for the loan. If the borrower defaults on the loan, the lender can repossess the equipment to recoup their losses.

Equipment loans also have flexible repayment terms, allowing small businesses to spread out the cost of the equipment over time. This can help improve cash flow and make it easier for businesses to afford upgrades or expansions.

Additionally, equipment loans can be a good option for businesses with less-than-perfect credit, as the equipment itself serves as collateral for the loan. This can make it easier for small businesses to qualify for financing, even with a limited credit history or lower credit score.

Overall, equipment loans can be a valuable financial funding option for small businesses investing in new equipment to improve operations and drive growth. By leveraging this type of financing, businesses can acquire the tools they need to succeed without putting a strain on their cash flow or credit. Contact Sunwise Capital today to learn more about equipment loans and how they can benefit your small business.

Business Startup Rollovers

A rollover for business startups allows you to invest funds from an existing 401(k) or individual retirement account (IRA) into your new business (ROBS). Because a ROBS is neither a business loan nor a 401(k) loan, there are no interest payments or debt to repay. It’s a way to put your retirement money to work in your company.

A business startup rollover allows aspiring entrepreneurs to access their retirement funds. The rollover provides the owner the capital to pay for the business startup funding. The rollover also provides for the initial operating costs of a new business without taking out a loan.

You can use ROBS to purchase or invest in an existing business or franchise. You create a C corporation (C-corp), allowing for shareholders and a new 401(k) plan.

The prospective business owner’s retirement funds purchase stock in the new company, and the stock sale proceeds fund the new or purchased company.

This option is better than borrowing against an existing 401(k) or IRA. The reason is the interest and penalties and the short-term nature of many 401(k) and IRA loans against the long-term benefits.

Direct Public Offerings

The term “direct public offering” (DPO) refers to a company’s public offering of securities to almost everyone in their community or network.

DPOs can take one of several regulatory paths, depending on the entity type and the network’s scope.

In its initial public offerings (IPOs), a DPO company avoids using intermediaries such as investment banks, broker-dealers, and underwriters, instead of self-underwriting its securities.

By removing the middlemen from a public offering, the cost of capital for a DPO is significantly less. As a result, DPOs appeal to small businesses and those with a long-standing and loyal customer base. A direct placement officer is also known as a DPO.

Venture Capital Funds

Venture capital funds are another option for small businesses looking for financial funding. Professional investors typically manage these funds by providing capital to startups and small businesses in exchange for equity ownership.

Venture capital funds can be a great funding source for businesses with high growth potential, as investors are looking for a significant return on their investment. While venture capital funding can be more difficult to secure than traditional loans, it can provide businesses with the necessary resources to grow and expand.

Venture capital funds often provide financial support, guidance, and marketing, operations, and strategic planning expertise. This can be invaluable for small businesses looking to scale up quickly and effectively.

It’s important for small business owners to carefully consider whether venture capital funding is the right option for their business. While it can provide the necessary resources for growth, it also means giving up a portion of ownership and potentially adhering to strict investor demands.

SBA Loans

An SBA loan is a federal government guaranteed business loan with a long-term and low interest rate. The SBA, a federal agency, backs the loans issued by lenders.

The Small Business Administration’s (established in 1953) goal is to assist small business owners nationwide with SBA-approved lenders.

The most common misunderstanding about SBA loans is that the agency makes them directly available to small businesses. Direct loans, on the other hand, are uncommon at the agency.

The SBA guarantees the loan, promising to reimburse the bank for a certain percentage of the loan if you default. This guarantee lowers the risk for banks and other lenders, allowing them to lend to more small businesses in the US.

You can get SBA loans from various banks and other financial institutions (like Sunwise Capital), but the application process, requirements, and fees differ.

SBA 7(a) loans ranging from $30,000 to $350,000 can be for debt refinancing and working capital. Working capital includes things like operating costs, marketing, and hiring.

SBA loans can buy new equipment as well.

Existing non-real estate-secured business debt can also be refinanced with SBA 7(a) loans (such as cash advances, business loans, and equipment leases).

SBA Commercial Real Estate loans range from $500,000 to $5 million and can be used to buy or refinance 51 percent owner-occupied commercial real estate.

How Sunwise Capital Can Help

At Sunwise Capital, we focus on financial funding for small businesses. We quickly approve loan requests so business owners can continue business as usual. Loan qualifications are less complex than the demands of a bank, as we are dedicated to helping small business owners succeed. Contact us today to speak to one of our experts and get started!

Frequently Asked Questions; small business financial funding

What are the business funding options for small business financial funding?

Several options are available for small businesses seeking financial funding, including traditional bank loans, lines of credit, venture capital, angel investors, crowdfunding, and Small Business Administration (SBA) loans.

How do I determine the best option for my small business?

The best option for your small business will depend on your credit score, financial situation, growth potential, and funding needs. It’s important to carefully evaluate each option and consider factors such as interest rates, repayment terms, and any potential ownership implications before deciding.

Is venture capital funding a good option for small businesses?

Venture capital funding can be a great option for small businesses with high growth potential, as it provides financial support, expertise, and connections from experienced investors. However, it’s important to consider the trade-offs, such as giving up ownership and potentially having to meet strict investor demands.

What are the benefits of equipment loans for small businesses?

Equipment loans can provide small businesses with the necessary funding to purchase equipment without putting a strain on cash flow. The equipment is collateral, making it easier for businesses with less-than-perfect credit to qualify for financing. Additionally, equipment loans have lower interest rates and flexible repayment terms, allowing businesses to spread out the cost of the equipment over time.

How can small businesses apply for equipment loans?

To apply for an equipment loan, small businesses typically need to provide information such as their financial statements, business plans, credit history, and details about the equipment they intend to purchase. Lenders will evaluate this information to determine the business’s eligibility for financing. Small businesses can also work with alternative lenders like Sunwise Capital, who provide equipment loans to help businesses grow and succeed.

In conclusion, small business financial funding options such as equipment loans can be a valuable tool for small businesses looking to invest in their operations and drive growth. By carefully evaluating the options available and choosing the best fit for their needs, small businesses can access the funding they need to succeed. Whether it’s traditional bank loans, venture capital, or equipment loans, options are available to help small businesses thrive. Contact Sunwise Capital today to explore your financing options and take your business to the next level.