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Financing Options for Small Business Owners

by William Gist

These days, starting your own business is easier than ever. With just a small investment of both money and time, you could have your own company running in a matter of days. However, starting it is easy, but staying relevant in front of your competition is not easy at all. Considering how many businesses are opening every single day, it is quite a task to stay unique in your niche. To provide the best products or services on the market, you will need a lot of capital. So, I guess it is time to check out all of your financing options.

Considering how many financing options are available for small business owners nowadays, you probably do not have any idea which one is the best for your company. To help you make the right decision, I am going to make a list of what I believe are the best options for companies of your size.

Partnered financing


In the business world, you will probably hear this term being used all the time. And there is a good reason why it’s mentioned so often. It is a very common way for companies to get some money to start growing.

How this works is quite simple. Take any one big competitor in your industry and imagine an offer that they will finance the growth of your company. As a beginner in owning a business, this may not make a lot of sense. Why would they invest so much money into your products and services? Well, it is not like they get nothing out of this. In fact, they may actually get a lot from this.

Usually, with a partner financing agreement, the smaller company will usually have to accept quite a few terms. In other words, you will need to give your partner on access to your products, services, your staff, information about your products, the technology that you use, the production process, and many other things.

Keep in mind, you still get to choose which information you’re willing to share and which is too valuable to share.

Business loans for SME


One of the most common ways of obtaining some capital for small and medium-sized enterprises or SMEs is through a business loan. It is easy, it is simple and it is probably the fastest way a company owner can get his/her hands to some cash. I personally believe that this might be the best option for small and medium enterprises that are looking for immediate funds. Timing is very important for growth and the longer you are without the funds you need, certainly get stuck.

Although, if you are looking for a long-term loan, I don’t think that your company will benefit from this kind of solution. Fortunately, the flat rates can be quite low, take, for example, Multiply‘s 0.7% flat rate. The funding process can also be quite flexible. It can be anywhere from just a couple of hundred dollars to several hundred thousand dollars.



This is the type of financing option that was not as popular as 10 or 20 years ago. In fact, crowdfunding was almost never used to help businesses with growth and product development. However thanks to the Internet and its users, crowdfunding has become quite a viable option for small businesses.

With the help of crowdfunding platforms such as Indiegogo or Kickstarter, companies can share their ideas with the public to which people will be able to donate. With proper marketing and explanation of the services or products, the hype around the company will build up enough to inspire many people to donate to your “cause”. Believe it or not, but a lot of inventions have managed to rack up to several millions of dollars just by these tiny donations. You shouldn’t disregard this as an option for your company.

Keep in mind, there are two downsides by picking this option. One problem is that the money that you get out of crowdfunding must be used to develop the product that you advertised and you also have to follow a certain timeframe. If you fail to fulfill that timeframe and promise to the donators, you might get yourself in a lot of legal trouble.

The other problem with cut funding is that you are openly sharing your ideas with the public. Of course, you probably have a patent already, but that is not always enough to protect your inventions.

Private investor


A lot of people make the mistake that partnered financing is the same as a private investor. Well, they might sound the same, but they are not as similar as you would think. A partner usually always refers to another company in the same niche or industry. While a private investor can be just one individual. This person sees a potential and interest in a certain start-up company and offers a bit of capital to promote growth and to realize that potential. In return, the angel investor will usually agree for convertible debt or for ownership equity.

A private investor can be a rare occurrence and might have to do something with luck. But, if you do find someone that is interested in your venture and your potential product, they might actually help you grow by a lot. An experienced investor will also assist you where you should spend your funds to ensure that you follow the right track to success.

In other words, not only will they supply you with the funds that you required to grow your business, but they will also help you save a lot of funds to. They will ensure that the money does not go wasted or in the wrong place.

There are a ton of other solutions for businesses to get financed, but I believe that these four options I mentioned above in the article are one of the best. The potential of a private investor, crowdfunding, pardon financing, and business loans is quite high. If you aim for success, I would advise you to use any of these financing options. As a small business owner, you may have thought of whether your business could benefit from a business loan. The rule of thumb is that you should calculate your current sales and determine what you would improve with the loan. Use this data to generate an estimate of the increase in profits you would receive after the loan. If you receive a positive result check out Working-Capital for more details.