Finding funding in any economy can be challenging, whether you’re looking for start-up funds as a small business, capital to expand, or money to hold on through the tough times. But given our current state of affairs, securing funds is as tough as ever.

When it comes to funding, there isn’t a one-size-fits-all approach. Aside from every business having unique funding needs, each funding option differs in availability, terms, funding amounts, and eligibility criteria.

The funding process has been made easy for you with the tips that will be discussed in this article. Find important answers to questions like, What is funding for small business? How can small business get funding? Read on.

• What is Small Business Funding?
• How Does Funding For Small Business Work?
• Why Does a Small Business Need Funding?
• How do Small Businesses Get Funding
• Can You Get a Small Business Loan With no Credit?
• What Is the Minimum Credit Score for a Small-Business Loan?
• What Are the Pros and Cons of No-Credit-Check Business Loans?
• No-Credit-Check Business Loans Alternatives?

What is Small Business Funding?

Small business funding is the process of borrowing capital from business loans and lines of credit exclusively provided by lenders and financing companies for small business use.

Read Also: How Does a Small Business Become Profitable

There are a wide variety of small business financing options, each with their own individual list of terms and capital amounts provided. Each financing option is designed to help small business owners from virtually any industry accomplish their specific funding goals in unique ways.

Common examples of small business funding options include:

• Small Business Term Loans
• SBA Loans
• Small Business Lines of Credit
• Equipment Financing
• Merchant Cash Advances

The terms of each financing option can be customized to match the needs of small business owners.

How Does Funding For Small Business Work?

First, a small business owner searches for a lender or business financing company that offers financing options exclusively for small businesses.

The business owner then enters a discussion with the lender or company to discuss:

• The amount of capital they need to borrow
• The terms they are looking for in their ideal financing option
• How they plan to use their capital to grow their small business
• The financial status of their business, including their yearly gross sales, FICO, and time in business

The financing lender or company will then try to qualify the small business owner with the financing option of their choice. If they do not get approved, they will suggest a different financing option that may suit their needs equally if not better, or refer the business owner to another source of funding.

Once approved, and the funding process is complete, the business owner will be able to access their borrowed capital to use as intended. The ease at which small business owners get approved, and how long it takes for the funding process to complete depends on three factors, including:

• The approval requirements of a specific lender or financing company (ease of approval will be impacted most by the qualification requirements set by each individual lender and company)
• The specific small business funding product applied for (different business loans and lines of credit have their own list of requirements)
• How the lender or financing company processes funds (some may offer expedited approval and funding, while others may take significantly longer)

Similar to paying off a personal loan, any capital borrowed will eventually need to be payed off.

However, small business funding is different from personal borrowing, as each business financing option is customized to offer a different repayment experience, giving small business owners greater flexibility to choose how and when they pay off borrowed capital.

For example, small business term loans are repaid at set intervals, with set rates.

Other options including merchant cash advances, revolving business lines of credit, merchant cash advances and other certain types of small business loans come with more flexible repayment cycles and interest rates that fluctuate to make repayment more convenient for small business owners.

Why Does a Small Business Need Funding?

Businesses need finance for a variety of different purposes, but there are some common reasons why businesses apply for funding. This can include loans for working capital, to buy machinery, to hire more staff, or even re-finance existing loans to reduce monthly costs. Find some of the common reasons below.

Starting a business

New businesses that are still in the startup stage will need funding to get off the ground, and good cash flow is essential to a small business. While most directors will use their own funds to start the business, very few manage to entirely self-fund the company to profitability, and will, therefore, have to seek external funding.

There are a variety of options for external startup funding, including bank loans, borrowing from family and friends, equity investment from a business angel, crowdfunding, and funding grants.

A loan to start a business can be used for everything from buying stock to marketing to hiring staff, but startup funding can be difficult to secure and many traditional finance providers will require lots of information, such as a detailed business plan.

Asset purchase

Growing your business and increasing sales often requires you to purchase assets such as new machinery or vehicles. While you may have enough cash to cover working capital expenses for your company, you may look for a loan to cover the purchase of new assets to enable your business to expand.

An asset funding loan is a great way to spread the costs of acquiring an expensive new asset. Fixed monthly repayments and loan terms from 6 months to 5 years can help you plan your cash flow in advance so you can make the most of your opportunity to grow.

An asset purchase loan can be used to buy different things for your business, depending on what you need to fulfil your expansion plans. Funds can be used for business vehicles, whether you’re looking to buy your company’s first vehicle or want to increase capacity by adding to your existing fleet.

You could also use a loan to buy office and IT equipment to make sure your staff has everything they need to grow the business or new machinery to enable you to make new products or scale up production while spreading the cost instead of paying a large amount upfront.

Working capital

Sufficient working capital is a key aspect of any company’s financial health, and not having enough working capital can have a serious impact on the future of your business. Many businesses choose to apply for external funding to create enough working capital to enable them to fulfil their growth ambitions.

A loan can cover short-term funding requirements while giving the business the money it needs to grow, or can bridge the gap between customer orders and supplier payments to help the company meet its funding obligations.

Figures from the British Business Bank’s 2015 Business Funding Survey showed that working capital is the most common reason for small businesses to seek funding.

This type of funding can also allow your company to take advantage of new opportunities that arise, investing in new products or services to enable you to expand.

Working capital loans can provide a useful ‘cushion’ for your company should you need a bit of extra cash – you’ll know your day-to-day running costs are covered with a loan, so you’ll have the funds available to meet any unexpected costs. Seasonal businesses may benefit from working capital funding during their quieter periods to cover basic expenses.

Growth funding

If you’re looking to grow your business to take it to the next level, you may very well need funding that enables you to execute on your business plans. Whether you want to increase sales, expand your range of products or services, move into new premises, hire more staff, or expand internationally, a loan for growth finance can help.

However, you are planning to expand your business, growth finance that’s right for your company can help you take advantage of new opportunities and make your ambitions a reality. If your business has its daily running costs covered, external funding may be the solution you need to grow.

Many such loans will have fixed monthly repayments over the term of the loan, enabling you to more easily plan your business finances as you grow.

Debt restructuring

If you need to restructure your company’s debt, a loan that consolidates your borrowings and reduces costs can make your finances more manageable for your business.

A loan to restructure your existing debt can make financial planning easier by reducing the number of monthly repayments you have to keep track of, and could potentially reduce your total monthly repayments. Refinancing your existing company debt can help your company grow by freeing up cash in your business for working capital and expansion.

How do Small Businesses Get Funding

Below we have compiled a list from a variety of places to help you research and narrow down the best option for getting funding for your small business.

Grants

Entrepreneurs can look into various grants to support their budding idea. These are often difficult to acquire and include very specific eligibility requirements, but that doesn’t mean they can’t be a viable funding option. Here’s a list of places to find that perfect grant for your business.

1. National Association for the Self-Employed Grants

Since 2006 the National Association for the Self-Employed has given out $650,000 in grant money. Applicants can receive up to $4,000 and must use the money for marketing, advertising, hiring employees, or expanding facilities. You do have to be a member of the association to apply, which costs $120 a year.

2. Nav’s Small Business Grant

Nav is an online marketplace that matches small business owners with their best business financing options by using credit and finance data. Each quarter, Nav gives away 3 grants, with the top grant winner receiving $10,000. This is to provide relief to small businesses that are struggling right now and hopefully empower them to reach their next level of success.

The application is easy. Simply explain your business, the challenges you are facing, and how the grant money would help push you in the right direction. All details about Nav’s Small Business Grant can be found here.

3. Small Business Innovation Research Program

One of the more lucrative federal grant programs is the Small Business Innovation Research Program, which helps businesses with research and development projects.

The program, which is coordinated through the U.S. Small Business Administration, offers several kinds of grants: open, closed, future, and solicitation listing. You’ll want to research which option is best for your company.

Expect a lengthy qualification process and, if selected, a strict measurement plan to ensure the money is going to good use.

4. Amber Grant for Women

Female business owners can take advantage of the Amber Grant. This grant was launched in 1998 by Womennet to help entrepreneurs succeed. Each month, one woman is selected for a $500 grant. At the end of the year, one of the winners is selected for a $2,000 grant.

It’s a simple application process. You just have to answer a few short-answer questions through an online form and pay a $7 application fee.

5. National Institute of Health Funding 

The SBIR/STTR grants provided by the National Institute of Health Funding are going to apply fairly specifically to technology or research-based businesses. If you fall within an eligible business-type, you can speak to a program manager before applying to discuss the technology or study you plan on using the grant for. This gives you an idea of what the institute is interested in and willing to fund, as well as guidance on how to develop your application.

6. Government Small Business Grants

Possibly the most widely available grants are provided by the U.S. government. However, these are typically industry-specific, meaning that you’ll need to look into what’s available for your business type. The SBA offers a convenient area on their website to conduct research about which may be right for you.

Traditional loans

One of the most widely available options is a traditional business loan. And while the process and requirements may be fairly similar no matter the lender, there are different loan options you’ll want to consider.

7. SBA loans

Small Business Administration loans are often one of the first places that small business owners in the United States think of looking for a loan, and they’re right to think this way. This can be a great option if you fit the criteria. 

If you’re unsure if you qualify, take a look at this article for details on the SBA Loan program. Or if you’ve applied and had your application rejected, check out this article for ways to improve your chances of being approved if you reapply.

8. Bank loans

Bank loans may be the most obvious solution for business owners looking for funding. While lending standards have become stricter over time, there are often funds set aside strictly for small businesses depending on the lender. 

Shop around and look for lenders that you can actually talk to a real person when applying. This helps ensure that you’re filling out the necessary paperwork and provides insight into what you can do to improve your chances of being approved.

You’ll typically have better luck chatting with a real person at a local bank or credit union, so do your research and chat with multiple institutions to find the best fit.

9. Small Business Lending Fund 

This is a dedicated government fund that provides capital for small business loans through specific lenders in each U.S. state. The primary benefit of this program is that it’s designed to grow the economy. 

The more a bank increases its loan output the less it pays for funding. Giving access to loans to more businesses and potentially passing along better rates or terms to business owners. You can review which banks are participating and download an application through the Treasury website, which is updated on a monthly basis as banks enter or exit the program. 

Crowdfunding sites

On crowdfunding websites, you create promotional materials and set up a page for your business or project to accept financial backing from those who visit the site. Each site varies a little, so be sure to read the fine print as you decide which is right for you.

10. Indiegogo

Another option for crowdfunding is Indiegogo. Similar to other crowdfunding sites, you create a profile, tell your story, set a fundraising goal, and ask for donations. However, Indiegogo’s fee structure is a little different—it’s not an all-or-nothing scenario. Indiegogo takes nine percent of your earnings if you don’t reach your goal, and four percent of your earnings if you do reach it. Here’s the fee structure. 

11. Kickstarter 

Kickstarter is the most popular crowdfunding site out there; since its inception in 2009, the site has raised $1.7 billion dollars, which funded 85,000 projects.

Like most crowdfunding sites, business owners create a profile page that outlines the business and sets a fundraising goal. Those who donate are promised some sort of reward, like being the first to try out the new product.

However, it’s an all-or-nothing scenario on Kickstarter. In other words, you have to hit your fundraising goal to keep the money. If you fall short, your donors get their money back. Even if you do reach your goal, Kickstarter takes five percent as a fee. Learn more about Kickstarter’s guidelines here.

Kickstarter has the name recognition, but it also has a lot of campaigns. Everything from art projects to business ventures are actively competing for funding, so you’ll want to evaluate the site to make sure it’s the right fit for your business.

12. Causes

Causes has been designed specifically to fund social, political, and cultural initiatives, making it perfect for nonprofit businesses. It’s entirely free to join and also acts as somewhat of a social platform for like-minded people looking to improve the world at large.

That means this platform isn’t just useful for acquiring funding but is a great way to connect with donors, partners, and potentially even future employees. 

13. Patreon

If you operate a digital media business such as a podcast, web series, or blog, a monthly subscription-based model may be more appropriate for you. And luckily, Patreon was designed as a crowdfunding platform specifically for digital creators.

Instead of single upfront investment or financing round, Patreon lets you establish specific tiers at different price-points for your followers to subscribe to. 

You can offer exclusive content, merch, access, and other items that grow in cost or quality, basically allowing you to conduct user testing continuously. It’s a great platform to build and directly connect with your audience while still operating across other social channels outside your Patreon. 

Just make sure you keep to a schedule or your subscribers may end up finding somewhere else to spend their money.

14. Fundable

Think of Fundable as a cross between Kickstarter and traditional venture capital funding. Instead of just posting a single product or service, you promote your entire business on the site, geared toward attracting funding from venture capitalists and other accredited investors. You still post timeline updates and an overall funding goal, but you also need to showcase your overall business plan. 

It basically acts as an ongoing pitch, but with a bit of additional investment on your part. Unlike most crowdsourcing sites that typically take out a fee, Fundable charges a monthly payment to stay on the platform. Additionally, it acts as an all-or-nothing funding system, meaning that you need to reach your goal or lose it all.

Peer-to-Peer Lending

It’s not always easy to explain your business concept to a banker, but explaining it to your peers is a whole different concept. A lot of startups chose to borrow money from their peers, but rather than asking your college buddy to cough up a few grand, try these websites instead.

15. Prosper

Prosper is a well-known peer-to-peer lending site. It has the name recognition in the field, with $3 billion given out in loans.

With this resource, you’re given an interest rate based on an evaluation. You create a loan listing so investors can see what you’re all about and what you need the money for. Once an investor commits to funding your loan, you’ll get the cash and set up a payment plan. Rates start around seven percent but can go as high as 35 percent.

16. LendingClub

If you’ve been in business for a few years, but need some additional capital, check out LendingClub. With LendingClub, loans are financed through investors. You need two years of business history, at least $75,000 in annual sales, and have a good personal credit score. There’s a five-year cap to pay back your loan, and as with any loan, you’ll face interest rates and additional fees.

17. Upstart

Upstart is designed to help younger entrepreneurs get funding with little to no credit or financial history. It does so through an underwriting model, that utilizes AI and nontraditional data, to review and evaluate based on things like education level, job history, place of residence, etc. This means that their requirements are far less strict and that eligibility is based solely on forward momentum and potential.

While the loans themselves cap out at $50,000, using Upstart can be a great method to consolidate high-interest debt or fund expansions to your business. 

18. Funding Circle

Funding Circle connects your small business with investors. Loans range from $25,000 to $500,000; you’ll speak with a loan manager who will walk you through the process, and you could get funding within two weeks.

Interest rates vary from six to 20 percent, depending on how quickly you pay back the loan. Plus, there are origination fees and late fees if you miss a payment. Check out the rates and fees before you apply.

19. Peerform

Peerform is designed to be beneficial for both investors and small businesses. The online portfolio builder helps investors create unique and diversified portfolios specific to their financial goals and willingness to take on risks. For borrowers that have between a 600-700 credit score, it offers incredibly competitive rates, as low as six percent, on short-term loans up to $25,000. 

While not the strongest choice to fund full-on business expansion or startup, it can be a great way for a relatively healthy business to pay off debt, make a large purchase, or cover operational costs for a time.

20. FundersClub

FundersClub was one of the earliest online venture capitalist crowdfunding platforms originally emerging from the YCombinator back in 2012. For businesses, you can either be solely funded by specific investors or be grouped in with similar businesses as a diversified fund to invest in. 

While it’s a great way to gain exposure to hundreds of accredited investors, actually getting on the platform itself is fairly difficult. They only accept around 2% of applicants and even recommend that your business be recommended by a founder before applying. But with a strong pitch and the willingness to make connections, it’s still a viable option for small businesses.

Can You Get a Small Business Loan With no Credit?

Your small business could get a no-credit-check loan if you don’t have good business or personal credit.

Most business loans require a personal guarantee and will rely not only on your business credit but also on your personal credit to secure approval and terms. If you don’t have good credit, your options for business loans may be limited to lenders that consider factors other than your business and personal credit.

With a traditional business loan, lenders evaluate you and your business based on the five C’s of credit: capacity, capital, character, collateral and conditions. These factors give lenders a framework for understanding your creditworthiness.

Business loans that don’t require a credit check work a little differently.

With these financing options, lenders look beyond your credit score to see how likely you are to repay what you borrow. That puts most no-credit-check business loans in the alternative financing category.

What Is the Minimum Credit Score for a Small-Business Loan?

The credit score you need to qualify for a business loan varies based on the lender and loan type.

A loan backed by the Small Business Administration usually requires a FICO credit score of at least 680, but other loans could have higher or lower requirements.

“Alternative lenders will work with lower credit scores,” says Brian Cairns, founder of small-business consulting company ProStrategix Consulting. “However, they will charge higher rates to mitigate the risk.”

If you want a business loan, lenders typically consider both your personal and business credit scores when making lending decisions.

Your personal credit score is partly based on your credit habits. That includes your payment history, your debt compared with your total credit limit and how often you apply for credit.

Business credit scores, on the other hand, tend to focus on payment history. The size of your company, your relationships with vendors, and your industry may affect your credit score.

These scores can have a different range from FICO scores, which go from 300 to 850. The Dun & Bradstreet Paydex business credit score, for instance, ranges from 1 to 100. As with a personal credit score, the higher a business credit score, the more likely a lender will offer the terms you want.

What Are the Pros and Cons of No-Credit-Check Business Loans?

The chief benefit of a no-credit-check business loan is access to funding when your credit might otherwise prevent it. By making payments on time and knocking down your loan balance, you can strengthen your business credit profile. And this could make future borrowing easier.

The downside of no-credit-check loans is that they’ll likely cost you more money than traditional business loans.

If you have bad credit or no credit and your business hasn’t proved itself profitable, your loan is riskier than a loan for an established business with good credit. Your lender can offset that risk by increasing fees or interest charges for the loan.

The higher your interest rate, the higher your cost of borrowing. If it means increasing your revenue, though, the outlay might be worthwhile. Set realistic expectations when you are a borrower with poor credit. If you can’t get the full loan amount you need, you can pursue alternatives.

No-Credit-Check Business Loans Alternatives?

Don’t assume that a business loan requiring a credit check isn’t open to you just because you have bad credit. You might be able to qualify for bad credit business loans, including fixed-rate loans.

Of course, you’ll pay more in interest charges and fees than someone with good credit. But if neither bad credit business loans nor alternative business financing appeals to you, you can explore other ways to fund your business.

Those include:

• Personal loans for bad credit
• Secured and unsecured small-business credit cards
• Secured and unsecured personal credit cards
• Loans from friends and family members
• Equity financing
• Crowdfunding

Each option has benefits and drawbacks. One benefit is that qualifying for a personal loan, line of credit or credit card may be easier than a traditional business loan.

Read Also: Get Your New Small Business Noticed With These 13 Marketing Tips

But commingling personal and business finances can be problematic. If you default on the debt, your personal credit would take a hit, and you would be personally responsible for repaying the debt.

Equity financing and borrowing from friends and family members also have their ups and downs. The latter gets tricky if you can’t pay back the money.

With equity financing, you ask investors to back your business, and in exchange, they receive an ownership stake in it. You don’t have to repay any money to those investors, but you’re trading off some control of your business.

Crowdfunding platforms can help your business get financing if you don’t want to turn to investors, friends or family members. Bad credit doesn’t matter for getting access to funds as much as the merits of your idea.

Backers accept rewards as repayment for investment rather than money. Say you run a startup that needs capital to manufacture an innovative reusable water bottle; you would give backers sample products.

The danger is that you may not raise all the money you need. You’ll be subject to campaign fees of about 8% from the crowdsourcing platform, and you’ll need to make sure that you follow through with rewards.

Conclusion

Regardless of which option you decide to take for funding, chances are that you may do all of these at some point as your business grows.  At the end of the day, you have a business to run and none of this matters unless it has your full attention.

So find a viable funding solution that also allows you to maintain operations and focus on profitability.