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Small Business Funding – Options & Tips

Now that you are all ready with your business idea and have even registered your business, let us talk about the funding. Prior to the process where you search for funding for your startup, it is important that you prioritize your small business funding needs. For instance, are the financials needs short-term or long-term? Are you searching for a way to cover the operating expenses or do you want to invest in your future assets like property?

The reason that these things are important to know is since you are about to find funding and you would obviously need the funding that is appropriate to your needs and goals. In case you go after the small business funding that is wrong, it would not only be a waste of time, and potentially a lot of money, it would also result in you transferring your ownership and company into someone else’s hands.

Many options for small business funding is available in the market, but you would need to carefully research and have a clear business plan in your mind before you would find the right one for your business as well as for yourself. This article would share the common resources for small business funding, so keep reading.

Almost all the small business funding options come under two categories:

  • Debt financing – It is when you take loans from a financer, or banks and pay them bank in a set installment plan with a specific interest rate for the total amount taken as loan. This payment has to be made as per discussed and planned, even if your business has not become successful and you have not made any earnings. But if your business succeeds and you pay all the loan amount along with the interest, you would be able to retain all the profits and even have the control of the company at the end of the day.
  • Equity financing – In this kind of small business funding, you would have to sell shares (ownership) of your company in exchange for cash. And if you business fails, you would not owe any amount to the person who you took the funding from. But if the company succeeds, you would not get all the profits of the company. This is because a part of the company has gone to the investors or part owners.

Now that you know about these two types, there are many places from where you can get either one of the small business funding. You would be able to get any sized loan from many places like:

  • Angel Investors: These are people who can help you in financing your project. But if you have a project that is very large and you need a lot of small business funding, a venture capitalist is the investor you need. Venture capitalists usually do not look at anything that is below $1 million.
    To find out about any of these investors, you would have to get into a network where crowdfunding takes place or otherwise. That is when you would be able to connect with one.
  • Banks: Bank is another great resource for obtaining the small business funding. Banks offer loans that are from a hundreds of dollars to about a maximum of a six figure loan. You also have the chance to open a line of credit where you would not have to pay any interest in the starting till you reach your maximum.
    The only thing here is that it is easy to get small business funding from the bank only if you have a good relationship with the bank. Another thing you would need for getting the loan is a third party guarantor or assets that would back up the loan amount. Moreover, banks also ask you for a lot of documentation and proofs of your financial responsibility, and it can take long for you to get a loan approved by a bank.
  • Credit Cards: This options works well for the financing that is short term. But for the credit card loans, you need to learn how to manage them well and pay them off quickly since they normally turn into huge debts if not handled well. Moreover, it is advised to keep an extra card in case of emergencies with the small business funding.
  • Family & Friends: They are the one-time source for any small loans that you are looking for as your small business funding. They are also called personal loans and it allows you to get the money much faster as compared to the other methods on the list.
    Moreover, you would not not many contractual strings attached in this case. The only risk here is that you would be putting a strain on your relationship with your relative, family or friend if your business fails and you are not able to pay back. It is better to keep a Promissory Note that would make the terms clear about the loan and its repayment for both the parties.
  • Grants: These are usually an option for the tech companies and are a good source of small business funding if you are able to get them. It should be kept in mind that the grants are very competitive and there are many strict guidelines that you would have to follow for using the money. To know about the grants in your area, you would have to check with the government agencies.

Other than these, to get the approval for the small business funding from most of the above mentioned options, you would need a personal resumes of owners, personal financial statements of owners, projected income/expenses, the amount invested in the business by the owners, lease details, projected opening-day balance sheets, a history of the business, and the statement of purpose for the loan.

There are many other documents that could be asked for, and it is advised to be ready to be rejected. And when you do get rejected, do not stop looking. At some point, you would get the small business funding you are searching for.


In the end, even if you take time to get the right financer or small business funding option, it is better to stay persistent and keep asking around. Other than this, it is advised that you have someone who would motivate our and help you to not lose hope. You need to believe in your business model. And in the end someone would say yes to you and would help you with the small business funding.

If you have not yet started your business and have your plan ready, IncParadise can assist you with incorporating and registering your business. Check out our packages that are customizable, and contact to have your company registered now or to know more!