Do you want to grow your business? You’re likely going to need some kind of financing. Some opt to try to self-finance, but that can slow growth and cause your business to fall behind the competition.
There are more options for small businesses to find financing. The approval rate for small business loans hit 27.5%, which is a record. The reason is that small business have more options to finance than ever before.
Keep reading to discover the top funding sources for small businesses and learn how you can get approved.
The Basic Types of Business Types of Financing
As you start to look at funding sources, you’ll find that they fall under two different categories. There’s debt-based financing and asset-based financing.
You might be more familiar with the terms that are used in consumer financing: secured or collateral loans and unsecured loans.
Asset-based lending is the same as a secured loan or a collateral loan. It’s guaranteed by some kind of assets, such as property or equipment.
Debt-based financing is similar to an unsecured loan. There’s nothing to guarantee a loan will get paid back, other than your word and your credit history. Debt-based financing tends to have stringent approval requirements and higher interest rates than asset-based financing.
The Top Funding Sources for Small Businesses
Once you have a better understanding of the categories of funding sources, you can find a loan that fits your needs. Here are the top funding sources to look at first.
1. Community and Economic Development Grants
If you’re opening up a physical location, you may be able to get an economic development or community grant.
Cities across the country are looking at ways to encourage small businesses to open up in distressed areas or to revive downtown areas.
As an incentive, they’ll give businesses grants that you can use as startup funding or take your business to the next level.
You’ll want to connect with your local small business center or your municipal economic development office.
2. AR Funding
What do you do if you’re a small business and you don’t own property or major equipment? How can you get an asset-based loan? You could leverage your accounts receivable account and use that as a form of collateral.
This article from YourFundingTree.com explains how accounts receivable funding works and when it makes sense to pursue this type of funding.
3. Venture Capitalists
One of the top funding options for businesses is to get a venture capitalist to invest in the business. You give up a portion of the company in order to obtain financing. That venture capitalist could provide business insights and connections that you may not have.
You have to choose the right venture capitalist fund. It’s almost like entering into marriage because there’s a lot at stake for both parties.
Fund Your Business
This is a great time to get your business off the ground with small business financing. The top funding sources are either asset-based or debt-based. You want to make sure that you choose the right one to fit your needs.
Check out this site often for more financing tips