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Finding the perfect program.

How To Get Small Business Funding: Loans, Grants & More

When your company is ready to begin exploring your business’s options for growth, understanding all of the avenues you can take to success is important.

We’re going to teach you about the different types of small business financing options, available to you. We will also get into more granular topics, like the difference between equity and debt funding and how to determine how much capital you need to scale up.

Let’s begin with the best small business funding options.

What Are the Best Small Business Funding Options?

The best option for your business depends on how much funding you need, how you plan to use it, and your industry. Your financial situation, credit score, and personal preferences will also influence the type of options that are accessible to you.

While there is no one-size-fits-all option for small business funding, there will always be a choice that best suits your company’s needs.

Let’s take a look at a list of the best small business funding options available:

Traditional Term Loans

A traditional term loan is perhaps the most recognized loan type. This type of funding is best suited for established business owners with a high credit score.

Short-Term Loans

Best used for businesses who may not have as strong of a credit history or who are looking to address a short-term need.

Business Lines of Credit

The right choice for business owners who need flexibility in their working capital. Use what you need and pay back only what you’ve used.

Business Credit Cards

If you’re a startup without any business history, your best option to get financing is to secure a small business credit card.

SBA Loans

Excellent for business owners operating a profitable business looking for the best rates and terms. Long payment terms and low interest rates combined with government backing makes this one of the most attractive funding options available.

Equipment Financing

The right choice for improving or upgrading your high-value, essential business equipment.

Invoice Financing

Reduces the wait time it takes to purchase material. When your customer’s invoices are past due, this business funding is your best option to gain access to the capital you’re owed.

Crowdfunding

For consumer-driven businesses, crowdfunding can be both a great way to market-test a new product and drive brand awareness.

Grants

If your business has a mission-specific cause, provides public services, or is just starting out, securing a grant could be the best option available.

Outside Investors

A great choice for businesses looking to achieve massive scale in their industry. These investors not only provide the capital needed to grow, they can also bring their own experiences and expertise to your business.

While knowing the different funding options that are available to you is important, timing is everything. In the next section, we’ll explore how to know when the time is right to pursue small business funding.

The Right Time to Look for Small Business Funding

When considering what would be the ‘perfect’ time to secure funding for your small business, most small business owners tend to trust their gut.

The decision to get financing can be challenging but, fortunately, we’ve been able to simplify the process.

Knowing when to pursue small business funding can include any of these business needs:

Buying more inventory

When your company needs to plan for a major order or wants to buy in bulk for a discount, it’s better to use outside funding rather than your operating cash flow.

Buying more equipment

Whether the best machine in the shop goes down or you need another piece of equipment to keep up with demand, funding your small business allows you to accomplish more while avoiding hiccups.

Hiring more staff

When you hire a new employee, cash flow is taken from your business. Using small business funding allows you to take the hit without losing any momentum.

Adding a new location

By securing business funding, your company can expand its physical footprint to meet the needs of your customers in new markets without depleting your working capital.

Refinancing debts

Regardless of size, each business has their share of debts. Small business funding allows you to pay off these installments and gives you peace of mind knowing that they’re being paid.

Working Capital

Small business funding can help see your business through a down sales month or a seasonal lull. With additional working capital, you can maintain your regular operating expenses, like rent or payroll, without interruption.

How to Determine How Much Funding Your Business Needs

Regardless of the reason why you need small business funding, most small business owners want to ask for as much working capital as they can possibly get.

While it may be tempting, it’s important to take only the amount you need for specific projects or uses. This will ensure that the payment amount is in line with what the expected ROI from the investment. Getting the funds you need is important, but it’s just as vital to protect yourself by not overcommitting.

To make sure that you’re doing everything you should to safeguard your business, here are the proper steps to take.

Keep Detailed Financial Records

The best way to understand how much funding you need and can comfortably pay back is to keep diligent records of all business activities.

Whether you’re using an accountant, accounting software, or have another effective system in place, having a true sense of credits and debits provides insight into what you can afford.

By knowing your quarterly and yearly finances and forecasts you’ll always be in a position to know when your business can best take advantage of small business funding.

Answer These 3 Questions

As you begin to establish and maintain your records, you’ll have a clearer picture of what you need. Even still, it’s a good idea to further define what you need from your business funding.

To do this, ask yourself the following questions:

  • How do you plan to use the funds?
  • What kind of return do you expect?
  • What current business expenses (including debt and other interest payments) are you already committed to?

Once you have answered these for yourself you should feel much more comfortable with your business’s needs, options, and goals.

Now that we’ve explored what you should be asking of yourself and your business, let’s keep breaking down how each funding option could best benefit your company.

Debt vs. Equity: What You Need to Know About the Two Main Small Business Funding Options

The next step in your financing process is to figure out how you should accept your funds. As you evaluate what’s available, you’ll notice that there are two main funding options:
debt-based funding and equity-based funding.

Let’s take a look at each of them and how they could benefit you.

Funding Your Business Through Debt Funding

Simply put, debt funding is a way your business can get financing by borrowing money.

A lender will provide you with a loan and you, as the borrower, will pay it back, with interest, over an agreed term. While it’s commonly a traditional bank or online lending company, your lender could be a friend or even a member of your family.

Debt funding can be secured online and can be deposited into your bank account as soon as the same day you apply. For the majority of small businesses, debt-based financing is more accessible than equity-based funding and doesn’t ask for any stake in the ownership of your company.

Funding Your Business Through Equity Funding

If your business is looking to achieve massive growth over the next 2 to 4 years, equity financing could be your best option.

At its core, equity financing enables you to raise working capital through an investor in exchange for ownership in your company. These investors are most often a venture capital group, an angel investor, or, just as we see with debt funding, could be a family member or friend.

The biggest benefit to equity funding is the access to the experience and mentorship that your investor can provide. When your business has made the decision to pursue major growth, it’s vital that you have an experienced guide in your corner. Of course, this investor will want your business to reach and even exceed your goals now that they, too, have an interest in the success of your business.

For this reason, equity funding isn’t recommended to small businesses without a massive drive to grow their companies. While everyone wants to see their businesses succeed and grow over time, not everyone has the appetite that an investor will naturally have.

How to Decide Which Type of Small Business Funding You Need

We’ve learned a lot about the different options available to small business owners and how debt-based funding differs from equity-based funding.

Now it’s time to consider what your business should weigh as you make your decisions.

The amount you need

If your business is only looking for a relatively small amount of working capital, debt funding is the better option for you. However, if you’re just getting your business off the ground with big-time aspirations, working with an investor might be preferable.

Your industry

For businesses that operate in major growth industries like technology, healthcare, or finance, investors will be able to both provide significant capital and key insights. If, on the other hand, you’re a local plumber or restauranter looking to make improvements to your equipment, debt funding is your best option.

Your network

The saying is true for reason but we’ll share it with you again: your network is your net worth. Tapping into influential and well-connected people in your network could provide access to an investor who would not only be interested in your business but could be the guide you need to drive your company forward.

How quickly you need funds

While investors are able to provide funds to your company based on their own schedules and liquidity, debt funding is clearly the faster of the two options, providing funding as soon as the same day.

How much control you want to maintain

If you’re looking to maintain your company’s independence, this is a big factor to consider. Debt funding will never dictate how you can or should spend your working capital. Equity funding, however, does allow this type of control.

Types of Debt Financing

While we introduced some of the best small business funding options earlier in the blog, we wanted to break down the most common options specifically for debt financing. The link between all of these funding products is that each features some type of interest and repayment terms.

By applying through Fast Capital 360, you can find the perfect financing product to fit your business’s needs. Find the best option for you by clicking here.

Let’s take a look at the 7 most common debt funding products.

Traditional Term Loans

Similar to a traditional bank, a business term loan provides flexibility and stability. Features terms up to 5 years with a set repayment schedule.

  • Loan Amount: $10,000 – $2,000,000
  • Loan Term: 1 – 5 Years
  • Interest Rate: Starting at 7%
  • Speed of Funding: As fast as 1 day

Short-Term Loans

The perfect loan to capitalize on your immediate projects. Businesses can secure upfront capital as soon as the same day, with repayment terms between 3 – 18 months.

  • Loan Amount: $3,000 – $500,000
  • Loan Term: 3 – 18 months
  • Interest Rate: Starting at 10%
  • Speed of Funding: Fast as same day

SBA Loans

Government-guaranteed long-term loans from the Small Business Administration. Terms range between 5 – 25 years.

  • Loan Amount: $5,000 – $5,000,000
  • Loan Term: 5 – 25 years
  • Interest Rate: Starting at 6%
  • Speed of Funding: Fast as 30 days

Business Lines of Credit

Borrow up to a maximum credit limit and only pay interest on the capital you borrowed. Repayment terms up to 5 years.

  • Loan Amount: $5,000 – $500,000
  • Loan Term: 6 months – 3 years
  • Interest Rate: Starting at 8%
  • Speed of Funding: Fast as 1 day

Business Credit Cards

All the familiarity of personal credit cards but with much higher spending limits and lower interest rates. Great for business owners who need intermittent funding.

  • Credit Limit Amount: $5,000 – $50,000
  • Repayment Terms: Monthly
  • Interest Rate: Starting at 13% [Many cards feature a 15 month 0% introductory APR]
  • Speed of Funding: Fast as 1 day

Equipment Financing

Secure up to 100% of the equipment value. Your business will own the equipment after payback.

  • Loan Amount: Up to 100% of equipment value
  • Loan Term: 1 – 5 years
  • Interest Rate: Starting at 8%
  • Speed of Funding: Fast as same day

Invoice Financing

Turn unpaid invoices into capital. Get back to running your business by bridging the gap and shortening your accounts receivable terms.

  • Advance Amount: Up to 80% of receivables
  • Estimated Repayment Term: 3 months – 18 months
  • Factor Rate: Starting at 1.05
  • Speed of Funding: Fast as same day

Additional Business Funding Options

With so many options for securing small business funding, it’s clear that one size does not fit all.

While debt funding and equity funding are the two main options for businesses looking to get financing, there are new options popping up all the time.

Let’s take a look at some of the other options available to small businesses.

Small Business Grants

Grants are often described as ‘free’ money, as they do not require repayment of any kind. Of course, this fact makes securing small business grants very attractive.

As you begin to wonder about how to get a small business grant, keep in mind that these funding programs are very competitive. Small business grants require you to fill out an application and can take months to fund once approved. In addition, small business grants carry specific limitations on how they can be used.

Friends and Family

As we’ve mentioned throughout the blog, you can secure a loan through friends or family.
Given your relationship, you’re more likely to get a longer time to repay as well as a more borrower-friendly interest rate.

Getting financing from someone who is close to you can come with a high reward but, naturally, carries additional risk. To protect both parties, and your personal relationship, write out exactly how the loan will be paid out to your business, how you will pay it back, and clarify whether this is strictly a debt-based loan or an investment in the company long-term.

While an attorney does not need to be present, be sure that each of you signs the written document so there are no questions about what is due to each person.

Crowdfunding Campaigns

The basic premise of crowdfunding allows individuals from your community, country, or even fans from around the world, to contribute small amounts of money to your goal. Those who do contribute often do so because they gain exclusive access to whatever it is your business is producing.

Crowdfunding platforms can be a fun, even viral, way of raising money for your business while also promoting your mission or product. The catch, however, is that these platforms come with an “all or nothing” approach.

Say you decided to raise $10,000 for a new printing of a very popular shirt for your printing business through one of the most popular crowdfunding sites like Kickstarter. Once you’ve set your goal, your campaign must reach or exceed $10,000 in order to receive the funds. If you’re unable to reach your goal, even if you’re a dollar short, you won’t receive a dime.

Crowdfunding platforms can be a ton of fun with the right message, but be wary of setting your funding goals too high.

Summing Up Small Business Funding Solutions

Clearly, there’s a lot that goes into choosing the best small business funding for you. The decision you make for your company will boil down to the personal factors that drive your business.

There’s no secret sauce that will provide you with the perfect answer to fund your business. Fortunately, there are plenty of choices available to you that will help grow your business as you’ve always strived for.

Fast Capital 360 lets you see all your loan options in one place with one quick, simple application. One of our dedicated Business Advisors is there with you every step of the way to answer any questions and to share their expertise. Click here to apply or click here to chat directly with one our of small business funding experts.


Jon Steiert

Jon Steiert

Jon Steiert is Fast Capital 360's Content Manager, focusing on making business and financial information accessible to any business owner. A born and bred Philadelphian, Jon loves hockey, comedy, and great customer experience. He’s always on the lookout for fascinating stories that just haven’t been told properly.
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