Small Business Funding 101

Almost all businesses need to think through funding options at some point. Perhaps you started off with your own capital but need additional funds to open new locations. Or maybe you need cash to expand your product offering. Whatever the reason, we’re here to give you an overview of small business funding.

Funding is one of the main concerns of most businesses. Even if you have a good product or service offering, without ample funding opportunities, you may not get to realize your full potential.

First, you’ll need to make the choice about funding through debt vs. equity. 

Debt Funding

Many small business start with debt funding because it’s easier and usually faster.

Debt funding could be a loan from a bank, a business line of credit, or even a loan from a family friend or sibling. Based on your size, you may not be attractive to investors, which isn’t necessarily a bad thing because it helps you maintain control.

Equity Funding

Equity is a different ballgame from debt. Giving out ownership of your company in exchange for money is a big step. Small business owners usually explore this option if they’re planning significant growth in a short period of time or have plans to expand rapidly. Equity funding could be through an investor, venture capital (project based large investments), or a family member or friend.

What’s right for you?

Your funding decisions will rely on a number of factors, including:

  1. How much control you’re willing to give up
  2. Your industry
  3. Your personal network
  4. What timeline you’re planning on
  5. Overall financing need
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Start with your contributions

Most business owners start by contributing what they can from savings and credit card options. However, you don’t want to get too deep in debt yourself, so be careful. Work with a financial advisor if you have concerns.

Look to friends & family

Many business owners look to family and friends for initial investments. The agreement varies – sometimes the individual wants the funds returned, sometimes it’s more of a gift. Whatever you decide, make sure you have it in writing with the approval of both parties. You don’t want to strain your relationships with friends and family. 

Consider Crowfunding

Crowdfunding is the newest trend in fundraising for new business ventures and projects. What better way to test out your business model, get feedback from early adopters, and raise money! In exchange for equity, early product, or other rewards, investors donate to fund causes and help small businesses get off the ground.

If you aren’t familiar with this crowdsourced funding world, check out Indiegogo, GoFundMe, Kickstarter, or many other sites! For a full list of options, visit this site: has compiled a great list.

Outside Investors

Many businesses reach a point where they require significant funds. An option in this case is seeking out an angel investor who is a wealthy individual or group of individuals looking to invest in an opportunity. 

A business credit card 

Business credit cards are definitely worth checking out. In addition to special perks for small business owners, you may be able to rack up airline miles or shopping points. Especially if you have high expenses and sufficient funds to pay the bill each month, this is a good option.

A bank loan or business line of credit

You may need to build your relationship with a financial institution before they agree to give you a business loan. Open a checking account and get their credit card, if they offer that. Over time they may decide you are eligible for taking out a business loan. 

Some institutions may offer a line of credit, which is helpful for businesses needing flexible access to cash.

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