Top 10 Business Financing Sources

Congratulations! Your business is doing well and you need to borrow some cash to fund the next stage of growth! Where do you get the money? What are your options for financing your small business besides winning the lottery or waiting for a distant relative to die?

Here is a brief look at financing options to grow or start your small business. You may have exhausted some of these already or you are playing in the big leagues and need millions of dollars. You need to consider the monetary costs, when you can receive the money, and other costs (such as ownership or Dad asking when you are paying the loan back).

  1. Personal Financing– This is your personal money: money in the bank, in the sock drawer, hidden in the freezer, stealing money from your kids’ piggy bank, dollar bills in your grandparents’ birthday cards, or coins hidden under your couch cushions. If you have any money that you can get your hand on today, it falls under this category.
  2. Retirement Funds– You can use retirement funds but save this as a last resort, if at all. If you withdraw money from your 401k accounts and such, then you will probably be subjected to an IRS penalty plus you have to pay taxes on top of the penalty. So losing 20%+ of your already hard-earned money is a HIGH cost.
  3. Weekly paycheck from your day job– You can finance your new business by using money from your day job. Why waste your money eating lunch out every day? Might as well invest your money in yourself each week instead of eating fancy sandwiches. A lot of entrepreneurs self-finance from their day jobs.
  4. Family and Friends– This is money you can convince your family and friends to give you or loan to you. And if you are lucky enough to have friends and family to give you money, then please invite me to Thanksgiving dinner. I could use some cash too.
  5. Credit cards– Credit cards can include both business or personal credit cards. What are the rates? They are creeping up at outrageous rates! If you can get free financing for a period of time, choose that over a high rate card. I’ve had a credit card for 20 plus years and the interest rate is almost 18%. I get offers in the mail for free financing for a year. Guess which one I would use if I need it?
  6. Other high interest loans– STOP! Those retail high interest loan places might offer you quick cash but at what price? Are you looking at 25% interest with all of the fees, just to borrow money for a few days? Do the math and verify the overall interest rate. If you need $1,000 and the fee is $250, what’s the rate? You may get the money fast though. Be aware of this vicious trap.
  7. Bank Loans– This is the traditional bank loan. Go to a bank. Fill out an application. Wait for approval. Either denied or approved. It may take a few months to get your money. once you get the money in hand, you have to start making monthly payments immediately. You may also be eligible for other loans- VA loans or small business loans through the so check out these cheaper and easier loans if you qualify.
  8. Crowdfunding– Hey! This is my niche. Crowdfunding costs about 5-10% of the money you raise. You can get the money in about 30 to 90 days, depending on the company you use. Crowdfunding is asking a lot of people through social media to contribute money to your project in exchange for a reward. It’s a lot of work and you could posisbly not receive any money if youa re not fully funded.
  9. Angel Funding and Venture Capitalists (VCs). If you have a big idea or unique products with a huge return potential, you can usually find some angel investors or VCs to give you money. They usually want a high return on their money and perhaps even ownership stake in your company.
  10. Initial Public Offering (IPO)– If you are ready for th ebig leagues, then you can do an IPO, selling stocks (ownership) of your company. But this is for businesses that are past the start-up stages. There’s a lot of SEC rules, paperwork, and high costs but can possibly result in millions of dollars.

There are a few other creative ways to get money for your business or extend the cash flow a bit. I’ve seen a few unique, but legal ways. If you are having cash flow problems, you can have more than one vendor on a product or raw material so that you can stagger your payments to them.

I have even seen loans from landlords to finance tenant improvements. The company paid the landlord 7% interest on the loan which was much lower than the company’s bank loan rates.

Whatever financing option you choose, weigh out the time that you can receive the money; the payments, fees, and interest rates on the money; and payback terms. Happy Financing!




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