Business strategy

Your guide to small business loans & financing

Your guide to small business loans & financing

‹ Back to The Vine

Money will be one of your biggest challenges when you start a small business, and it will continue being a major concern as you try to sustain and grow your company.

As a small business owner, it pays to know and even master the ins and outs of small business loans or financing.

Traditional banks used to be the only viable financing option for any small business. But that’s no longer the case today.

Small business owners now have more choices, whether you’re searching for funds to address cash flow gaps, or to expand your business.

But it’s important to understand your choices in order to make the smartest decisions for your business.

In most cases, your decision will be based on why and how soon you need the financing. Here are 3 business scenarios and the top financing options to consider.

Small Business Financing If You’re Just Starting Out

Raising capital to launch a new business is challenging. Banks and other major lenders typically don’t offer startup financing. So your choices are limited. Here are some of the best and most popular options:

Personal Savings, Family & Friends

Many entrepreneurs start a business with their personal savings or with the help of family and friends. There is one clear advantage to this: With your own savings and financial support from people you know, you probably wouldn’t have to worry too much about your personal credit history or your balance sheet.

However, unless you have very wealthy friends and relatives, the funds available to you would probably be limited. Plus, if things go wrong with your business, you risk straining or even ending some important personal ties.

Credit Cards

Credit cards are also a popular and practical way of launching a business. But this is a very expensive form of financing. You should use credit cards only for minor business expenses. It’s also smart to pay off balances as soon as possible.


Crowdfunding has become an increasingly popular way of raising capital. There are two basic types:

Rewards Crowdfunding – You offer gifts, usually the product or the service you are planning to sell, in exchange for contributions solicited through such platforms as GoFundMe and Kickstarter.

Equity Crowdfunding – You offer equity or minority ownership in the business in exchange for funding.


There are also a number of grants available to first-time business owners. An excellent resource is the U.S. Small Business Administration which runs Small Business Development Centers throughout the country. SBDCs offer free business consulting and low-cost services for different business needs, including crafting and developing business plans and securing financing.

Small Business Financing If There’s An Emergency

You just launched your business and things are progressing smoothly. But then you run into unexpected hurdles and emergencies. It could be a piece of equipment that suddenly broke down or an unforeseen shortage.

This is a dilemma for many business owners for whom quick and convenient access to financing is important. Having plenty of cash in your business bank account would certainly help. But for many businesses, especially those that are just getting started, money is usually tight.

Credit cards are certainly an option for dealing with everyday business funding needs and emergencies. But again, this type of financing is expensive. You definitely should avoid using credit cards for major expenses.

Instead, you should consider 3 other types of lower-cost financing that may make more sense for emergencies and other short-term needs:

Term Loan

A term loan is a loan that you repay over a set period of time. The repayment terms vary depending on the lender. The loan may be based on a fixed or variable interest rate. The repayment period could range from 6 months to 30 years.

SBA loans are the most popular type of business term loan. Since they are guaranteed by the federal agency, SBA loans are less expensive than other forms of business financing.

The downside of using a term loan for day-to-day business needs is that you end up borrowing and paying interest on funds that you may not need all at once. Two other types of financing offer more flexibility.

Business Line of Credit

A business line of credit gives you access to a set amount of funds based on a financing arrangement with a traditional bank or an online lender. Unlike a term loan, you withdraw only the funds you need up to your credit limit. You also pay interest only on the amounts you use, which makes a business line of credit both flexible and practical.

Invoice Financing

With invoice financing, which is also referred to as accounts receivable financing or invoice factoring, you get cash advances on unpaid invoices that are due in 30, 60 or even 90 days. This can be a smart financing option for businesses that sell products or services to other businesses. Instead of waiting weeks or months to get paid, you’re able to get access to funds your business already earned.

Small Business Financing For Growing Your Business

As business improves, you’ll probably start looking to expand by opening a new location, hiring more people or buying new equipment.

Financing once again will be key in this stage of your business. For big ticket expenses, long-term loans are usually more cost-effective and practical.

Term Loans, particularly SBA Loans, are the most ideal type of financing for these major expenses.

Equipment Financing is also available for major equipment purchases. While many small businesses rely on traditional banks for equipment financing, online lenders have begun to play a critical role in addressing this need.


Bluevine Recommendations

Bluevine offers both Invoice Financing and a Business Line of Credit, called Flex Credit, which give small and medium-sized businesses fast and convenient access to working capital.

We also recommend these partners for other financing and business needs:

Fundera and Lendio are online marketplaces for different types of small business loans and financing.

Seek Business Capital helps small business owners who are just getting started. The company offers a range of services from helping you register your company, creating a business plan to obtaining startup funding.

SmartBiz offers a quicker and more streamlined process of applying for SBA loans.

Credibly and Fora Financial offer financing for working capital and business expansion.

Intuit is a popular platform where small businesses can access different services, including accounting, payroll processing, and financing.

Currency Capital makes it easier to find low-cost financing for your equipment purchases.

Finance Factory offers a broad range of choices, including financing for startups, SBA loans, revenue-based loans advances, and equipment financing.

This article was first published on August 30, 2017. It was updated on August 21, 2018.

More from the Bluevine Business Blog

Invoice Factoring Basics: How To Pick a Factoring Company

How To Get a Business Line of Credit and 5 Mistakes to Avoid