The SMB funding sector has been seriously heating up in the last few years. For many ambitious business owners, the challenge isn’t a lack of ideas but rather a lack of capital. That’s why we’ve compiled 20 Ways To Get Funded If You Are An SMB, offering practical solutions to tackle this common hurdle.
You’re probably asking yourself: how can I resolve funding issues?
As we all know, traditional SMB funding took a hard hit during the financial crisis of 2008, with banks favoring larger, more secure, and stable investments over SMB ventures.
Most SMB owners are all too familiar with the challenges of securing financing for their companies or funding a new product. It’s rarely easy, and there’s no one-size-fits-all solution. But I hope that these 20 SMB funding resources can provide the guidance you need.
1. Banks
Banks can help you only if you have a stable business, a solid business plan, strong credit and finances, or collateral.
Traditional banks are a great starting point for eligible businesses, as they can assist you in evaluating your real position in terms of funding. For example, you might consider exploring options like a business credit card, lines of credit, or even grant funding opportunities.
If you’re running a women-owned business, nonprofit organization, or any other type of entity that qualifies for business grants or technical assistance, banks can often guide you toward relevant resources.
Even if your company lacks a strong track record or sufficient assets as collateral to secure a loan, speaking with a bank employee can clarify what documents you need and help you choose the best funding option tailored to your needs.
2. Small Business Administration
If your business doesn’t meet the strict lending criteria of traditional banks, the U.S. Small Business Administration (SBA) might be able to help. T
hey, work with lenders (in most cases, banks) to offer a federal guarantee on your loan, reducing the risk for lenders and making it easier for you to access the funds needed to strengthen and grow your business.
The SBA also connects you with agreeable rates that traditional lenders can provide. Additionally, unlike most bank loans, you can approach the SBA for financial assistance even if you’re just starting your business.
They also offer business grant programs tailored for rural communities, as well as educational resources to help you understand the grant application process.
If you’re exploring equity investments or considering working with venture capitalists, the SBA can be a helpful resource for navigating these options.
For businesses managing procurement needs, services like Amazon Business can streamline operations alongside funding assistance.
However, the SBA application process can be challenging, often requiring extensive documentation and careful preparation of appropriate forms.
To simplify the process, online lenders like SmartBiz provide a more modern application experience, issuing SBA loans faster than traditional banks.
Click here to find more information about SBA.
3. Credit Unions
In case you like a personal touch and have an existing membership, credit unions may be a good choice for you.
Like banks, they can offer you encouraging rates and loans backed by the SBA. But unlike banks, they have increased their SMB lending since 2008.
If you are a member, the co-op nature of credit unions generally ties them to the community, and that can help you get the benefits of name recognition and more personal relationships.
4. Crowdfunding
According to The Oxford Dictionaries, crowdfunding is “the practice of funding a project or venture by raising small amounts of money from a large number of people, typically via the Internet.”
The whole deal with crowdfunding is that is to use everyone you know to help fund your business through small investments.
Usually, these small investments come with some bonus, whether it is a piece of product or some kind of ownership in the company.
Here are a few crowdfunding sites you should consider investigating more
- Kickstarter – Their mission is “to help bring creative projects to life”
- GoFundMe – “Fundraising site for personal causes and life events”
- Indiegogo – “A way for people all over the world to join forces to make ideas happen”
5. Online Alternative Lenders
If you need cash quickly, have bad personal credit, or don’t want to wait for a bank to approve your loan, online alternative lenders can be a viable option.
As traditional banks continue to limit access to capital, the popularity of online alternative lenders has surged.
These lenders are particularly useful for business owners who constantly struggle with the need for fast cash or bad credit.
Many online lenders can turn around funding within 24 hours, making them an attractive option for time-sensitive needs.
However, it’s important to note that the cost of borrowing from online alternative lenders is significantly higher than other solutions.
Some lenders may charge annual percentage rates exceeding 100%, so it’s essential to approach these options with caution and use them primarily for informational purposes.
If traditional banks or federal grants aren’t viable options, alternative lenders might be worth considering, especially when exploring private investors or other investment opportunities.
They can serve as a backup plan when banks decline your application, though understanding the terms thoroughly is crucial before committing.
For more information about online alternative lenders, click here.
6. Peer-To-Peer Lending (P2P)
Peer-to-peer lending is a method of debt financing that permits individuals to borrow money – without using intermediaries such as official financial institutions.
It usually removes the middleman from the whole process, but it also demands more effort, time, and risk in comparison with the general brick-and-mortar lending scenarios, for example.
Here are some of the most popular P2P Lenders you can investigate:
7. Merchant Cash Advance
Merchant Cash Advance works this way: Your company sells a part of its future credit card sales to a Merchant Cash Advance provider and in exchange, you get a sum of working capital.
So, your company tells its credit card processor to automatically forward a fixed percentage of its credit card earnings directly to the provider once they are settled.
Here are some Merchant Cash Advance starting points:
8. Private Loan Guarantees
If your company is in an early stage and the bank is ignoring your appeals, you can find an investor to guarantee your loan.
9. Community Development Financial Institution (CDFI)
Community Development Financial Institutions (CDFIs) belong to the private sector. Their primary mission is to be financial intermediaries with community development.
They usually attract capital from both public and private sources. CDFIs help economically afflicted communities by providing capital and financial services, and credits that are generally unavailable from mainstream financial institutions.
Click here and find out more about CDFI.
10. Offices Of Economic Development
The government cares and constantly works to make and promote job opportunities.
The basic principle of the government is that they can help people to create an environment that boosts innovation, awards risk-taking, and endorses equal opportunity ranging from job priorities, and investing in public infrastructures to developing affordable housing.
11. Business Line Of Credit
A business line of credit can be a true asset to your company because it will help you meet the short-term working capital needs such as covering cash flow shortages buying increased seasonal inventory or unpredicted operating expenses.
12. Bartering
Bartering is the act of exchanging goods or selling services without using the money. It enables those SMBs with the lack of monetary currency to still collect goods and receive services.
Here you can find 36 bartering websites.
13. Vendor Credit
Vendor Credit is a loan from one company to another that is usually used for buying goods from the company that provides that loan.
The vendor can increase sales, earn interest, and sometimes even acquire an interest in the customer.
More information about Vendor Credit.
14. Customers/Vendors
Customers or Vendors a person or an organization, that receives and/or sells goods and services from/ to another party and can choose between different businesses and products.
Learn how to create Contacts as Customers, Vendors, or Bank Accounts
15. Factoring
Factoring represents a financing method in which a company owner sells accounts receivable at a discount to a third-party funding source to boost capital.
16. Purchase Order Financing
Here are the steps to purchase order financing :
- Get a purchase order from a customer;
- Find a reliable supplier for the products;
- Place the order with that supplier.
It can be a great solution if the cash flow reserves of your SMB are low. Purchasing order financing can free up cash for the critical business cost.
Another benefit of Purchasing order financing is that it doesn’t show up as debt for the company. Besides using that extra cash to get discounts on purchases, it also allows your SMB to get approved for more financing.
King Trade Capital is the largest purchase order finance company in the United States.
17. PayPal Working Capital
PayPal Working Capital lets SMBs pay their loan back as they get paid.
See how PayPal Working Capital realy works.
18. Equity Financing
Equity financing represents the act of boosting money for company activities simply by selling general or preferred stock to institutional investors or individuals.
So, in return for the paid money, shareholders receive ownership interests in the company.
If you want to find out how it works, click here.
19. Equity Crowdfunding
Equity Crowdfunding is a hybrid way of funding, which combines crowdfunding and equity financing.
It can be classified as a relatively new way of funding since it was opened to the public in May of 2016. Even if you’re not an accredited investor, you can fund your SMB in exchange for equity in the company.
More information about Equity Crowdfunding
20. Grants For Specific Industries
If your business operates in a niche industry, you might be eligible for grants tailored to that sector.
For example, there are grants available for technology startups, green energy initiatives, healthcare innovations, and even creative industries like film and music production. These grants are typically offered by government agencies, private foundations, or industry organizations.
Unlike loans, grants don’t need to be repaid, making them an excellent funding option.
However, the application process can be competitive and requires a well-thought-out proposal outlining how your business aligns with the grant’s objectives.
Conclusion
Most SMB owners are familiar with the challenges of getting funding for a new product or financing for their business.
As you already know, there’s no short, easy way of funding, in most cases, but I hope these SMB funding resources can help.
