Small business financing options

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Small business financing options

Small business financing options: Loans, literature, and more

By Chris Scott September 11, 2020

Here’s what we’ll cover

Small business financing options

How to get approved for business financing

How much business financing you need 

How to know if you need business financing

Secure funds for your small business

As a small business owner, you might worry about cash flow. You need money to start your business, but also to grow. The good news: there are a lot of small business financing and funding options out there.

One report from the National Small Business Association found that in 2017, three-quarters of companies were able to get enough financing to support their business goals. Business owners used funding for things like:

  • Starting a new business
  • Buying or renting real estate
  • Purchasing inventory
  • Buying new equipment

If you’re a business owner that’s ready to grow your company, you may wonder where to start. You’ll find everything here you need to get started, including a list of different business financing options that could work for you.

Small business financing options

You’ve used accounting software to forecast your company’s future growth. You know how much money you’ll need to expand your operations. Now, how do you go about getting funding? Fortunately there are a ton of business financing options out there.

How to get approved for business financing

So you’ve looked through your business financing options and thought about which types of loans might work best for your business. It’s also important to understand the factors that may influence your chances of getting approved for funding:

  • Your personal credit score
    Your personal credit score is linked to your Social Security number and will affect the terms and interest rates you’re able to get on a loan. Be sure to review your credit report thoroughly and correct any mistakes before submitting your loan application.
  • Your business credit score
    Your business credit score is linked to your Employer Identification Number and will also affect the terms and interest rates of your loan.
  • Time in business
    Traditional banks prefer to loan to businesses that have been around for at least two years, which shows that you’re established in your industry. If your business is fairly new, it can help to provide supporting documents to prove you’ll make good on your loan. This could be revenue projections, outstanding invoices or growth projections. You could also leverage personal assets as collateral.
  • Cash flow capacity
    To show lenders that you’re able to repay your debt, you can share your business’ cash flow statements and projections. This information can also be shown through financial statements and tax returns. You want to make it clear that your business has enough incoming cash flow to repay your loan, on time.

When you are ready to apply for business financing, it’s helpful to gather as much supporting documentation as possible to increase your chances of getting approved:

  • Personal background (addresses, names used, criminal record, education background)
  • Personal income tax returns
  • Business tax returns
  • Bank statements
  • Business plan
  • Financial projections
  • Loan history
  • Collateral
  • Use of loan
  • Debt schedule
  • Legal documents (licenses, registrations, contracts, certifications, etc.)

How much business financing you need

Before applying for business financing, it’s important to look carefully at your business expenses to figure out how much you need to borrow and how much you can afford to repay. You can use the Debt Service Coverage Ratio to calculate what you can afford:

Net operating income / total annual debt = debt service coverage ratio

For example, if your net operating income is $500,000 and your total annual debt is $300,000, your debt service coverage ratio is 1.67. Having a ratio of at least 1.0 will show lenders that you are able to repay your debt.

How to know if you need business financing

Just because you can borrow money, doesn’t mean you should. Consider the opportunities and risks that come with increasing your business funding. Here are some scenarios where it makes sense to apply for business financing:

  • You’re starting a new business
  • Your business is seasonal
  • You’re experiencing cash flow gaps
  • You’re experiencing new/increased costs
  • You want to grow your business

Whatever your reason, it may also help to consult with a business mentor or look into resources to learn more about the pros and cons of small business loans.

Secure funds for your small business

Whether you’re someone looking to open your own business, or are an experienced business person looking to expand operations, one thing remains the same—you’ll need capital to get things done.

From short-term business loans to equipment financing, there are a lot of small business financing options available. With a little research and planning, you’ll be able to find the right type of funding for your business.

5 mistakes companies make when seeking financing

By Geri Stengal September 11, 2020

Whether you’re starting a new business or expanding a successful enterprise, you may need to get outside financing. According to accountant Gary Topche of Topche & Company*, the mistakes business owners make are similar, no matter their size. Topche’s company specializes in serving the financial needs of businesses—from startups wanting to grow big in a hurry, to companies already worth half a billion dollars.

Here are five common business financing mistakes that Topche sees companies of all sizes make.


*QuickBooks Resource Center:5 Common Mistakes Companies Make When Seeking Financing, September 11, 2015.

What could you do with business funding?

This publication is designed to provide general information regarding the subject matter covered. It is not intended to serve as legal, tax, or other financial advice related to individual situations. For this reason, you are advised to consult with your own legal or tax professional regarding your specific situation.

**Product Information

QuickBooks Capital license: QuickBooks Capital is licensed as Intuit Financing Inc. (NMLS# 1136148). In California, loans are made or arranged by Intuit Financing Inc. (CFFL #605 4856). Intuit Financing Inc. is a licensed lender in states that require a license. Our service is limited to commercial or business loans only. State licenses include: AK #10000990, CA #6054856, DC #ML1136148, FL #CF9901279, MD #03-2339, MN #MN-RL-1136148, NM #1899, ND #MB102690, RI #20183584SL, RI #20183583LL, SD #MYL.3279, TN #166418, VT #7194 and VT #7195.