Financing options for small businesses
The top sources of small-business financing include loans from banks and online lenders, as well as small-business grants.
Business financing is money that helps you start, run or grow your business. You can get business financing by taking on debt, like small-business loans from traditional banks and online alternative lenders, or by offering investors equity. The right financing for your business will depend on factors such as: why you need capital, how fast you need it and your business’s qualifications.
How does financing a business work?
Financing for small businesses usually involves some form of debt; however, there are zero-debt options as well. With debt-based financing, you’ll have to pay back the funds you borrow over time, usually with interest.
With traditional banks limiting access to capital, online lenders have seen an increase in popularity, especially among business owners who are facing credit challenges. In 2022, 37% of medium- or high-risk credit applicants applied to online lenders and 14% applied to nonbank financial companies, according to the annual credit survey from the Federal Reserve
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Online lenders also offer fast cash, with several of them able to approve and fund applications within 24 hours. These lenders offer a variety of small-business financing options, including term loans, lines of credit and invoice financing. The cost of borrowing, however, is generally higher; annual percentage rates can range anywhere from 10% to 79%.