Business Funding: The Best Ways to Fund Your Business in 2020

What are the types of small business funding?

There are several different types of small business funding, from short-term and long-term options to others designed for recurring funding needs.

Here are 5 ways to fund your small business:

1. Business line of credit

A business line of credit is one of the most flexible types of business funding. 

That’s because, as opposed to a single lump sum, it gives you access to a pool of cash which you can tap into again and again provided you pay down your balance each time. 

Pros and cons:

• Pro: A business line of credit gives you a recurring pool of funds you can tap into whenever you need it.
• Con: Business lines of credit, due to their recurring nature, tend to have lower limits. 

Learn more about business lines of credit.

2. Term loans

A term loan is a single lump sum of money borrowed either on a short-term or long-term repayment term,

Short-term loans are often used as a quick method of obtaining a small amount needed for emergencies such as sudden expenses, payroll, or a rush order late in a busy season. 

Pros and cons:

• Pro: Good for a quick sum of cash needed for emergency expenses. 
• Con: They often have higher interest rates compared to other funding options. 

Learn more about term loans.

3. Merchant cash advance

With a merchant cash advance, you sell a portion of your future credit card sales to obtain a lump sum, which you then pay back through your daily credit card sales. 

These are particularly great if you do primarily credit card transactions on a daily basis as the amount you can borrow is based on that amount. 

Pros and cons:

• Pro: They’re a great way to obtain funding if you accept regular credit card sales but you don’t have the credit to be approved for a traditional lending option like a business loan. 
• Con: Rates tend to be higher than most funding options. 

Learn more about merchant cash advances.

4. SBA loan

Offered by lenders working in conjunction with the SBA or Small Business Administration, an SBA loan isn’t a single product but several different small business funding options. 

SBA loans are unique, however, in that a portion of the loan is guaranteed to the lender. That’s great for the lender, but how does that help you? 

Because a portion of each SBA loan is guaranteed, lenders are often able to offer SBA loans with reduced interest rates, passing a portion of that savings off to you. They’re also more likely to work with businesses that have bad credit, making approval easier. 

Pros and cons:

• Pro: Typically better rates and easier approval than traditional bank loans.
• Con: Paperwork tends to be more complicated as it must pass through a second party (the SBA), so approval can take considerably longer than other funding options. 

Learn more about SBA loans.

5. Invoice factoring

Similar to how a merchant cash advance works, with invoice factoring, you sell part or all of your accounts receivable in exchange for a sum of cash based on the total amount (often 95%).

This type of funding is useful for those who are wary of offering collateral, as the invoices themselves are used as collateral for the advance. 

Pros and cons:

• Pro: An alternative form of funding for business owners who don’t have great credit or accept regular credit card sales, and have a sizeable accounts receivable. 
• Con: The company which provides the advance takes over the collection of the invoices, which may not be preferable in terms of customer relations. 

Learn more about invoice factoring.

Complete our online application and see how much you can be approved for: Apply Now

Where can I get business funding?

Similar to the different ways you can fund your business, there are different places where you can get that funding. 

Here are the 6 main places to get funding for your small business: 

1. Banks

The traditional funding source, banks still make up a large portion of the small business funding market, even if many alternative avenues have begun to offer competitive or in some cases more favorable terms.

Banks have security on their side, with loans often insured by the FTC, but for newer businesses especially they’re notoriously hard to be approved for and approval is a lengthy process. 

2. Credit unions

Similar to banks, credit unions differ in two major ways: 

• You can get better rates at local credit unions
• You often must join or be a part of that credit union to obtain funding from it

If joining your local credit union isn’t a problem, it could be a good option as rates tend to be lower than traditional bank loans. 

3. The Small Business Administration (SBA)

The SBA, as mentioned earlier, offers several funding options through lenders. So, in most cases, you’re not really obtaining funding directly from the SBA but through an SBA-approved lender. 

However, the approval process can be quite difficult compared to other alternative funding methods, more comparable to a bank loan but without quite the same wait time. 

4. Crowdfunding

A popular way to fund most small business ventures over the past decade, crowdfunding feels new in terms of traditional lending methods, but we have a much longer history of crowdfunding and peer-to-peer funding than any type of formal business funding. 

Crowdfunding gives you the ability to acquire the money you need to launch a new business, product, or grow. However, historically it works only for one of a dozen or so industries including artistic pursuits, hand-made goods, games, books, and unique inventions among others. 

It can also take considerable work implementing a marketing campaign and there’s no guarantee that you’ll reach your funding goal. 

5. Grants

Grants are a lesser-known but useful option for funding your business. 

You need to qualify for a grant, and they’re not available to every type of business, be it an industry, size, or based on some other specification such as being a veteran or woman-owned business. 

However, if you do qualify, they’re a way of potentially obtaining funding for your business often entirely for free. 

6. Alternative lending

Alternative lending has exploded over the past decade as one of the most prominent forms of online business funding, often being the first or second place that small business owners look outside traditional bank loans (which many business owners don’t apply for, which credit score requirements often at 720 score or higher).

The two primary benefits of alternative lending options are:

• They don’t typically require good credit (even bad credit is acceptable for many options), and
• They don’t require any collateral

However, to offset the potential loss from approving businesses without perfect credit, rates tend to be higher for most alternative funding options.

Fund your small business with Excel Capital

You have more options than ever before to fund your small business ventures.

At Excel Capital, we offer several options for business owners who have bad credit or are lacking other elements that would typically deny them approval for a traditional loan.

Whether it’s:

• A business line of credit that offers you a flexible cushion during a slow season or the extra funds you need to stock product before a busy one
• A single lump sum to handle an emergency expense, or
• A merchant cash advance you can pay off on convenient terms that adjust as your sales rise and dip

We have an option that’s a perfect match for your financing needs. 

If approved, you can get exactly what you need to grow your business, make that key investment, or keep things moving along smoothly without skipping a beat. 

Learn how much you can be approved for:

Complete our online application and see how much you can be approved for: Apply Now

Frequently Asked Questions