From bootstrapping to bank loans: The best ways to finance a small business

It takes money to make money, as the old saying goes. But for many entrepreneurs, finding that money is the first major hurdle on the road to success. Recent data from the 2025 Intuit QuickBooks Small Business Financing Report indicates that ambition is high among business owners, with 65% planning to invest in their operations in the near future. However, navigating the complex landscape of business funding and lending can feel overwhelming.

The good news is that you have more financing choices than ever before. From traditional bank loans to modern fintech solutions, there is likely a financial product that fits your specific needs. What are the best ways to finance a business? There isn’t a single answer—financing choices depend on your business needs, resources, and timing. By carefully evaluating your options, you can secure the capital you need to turn your business ambitions into achievements.

Jump to:

• Understanding Your Financing Needs
• Types of business financing
• Personal financing options
• Alternative financing
• Identifying the right financing options for you
• Choosing the right financing option
• Building a strong financing application
• Managing multiple financing sources
• Fuel your growth with the right funding

Understanding Your Financing Needs

Before exploring financing options, assess how much capital you need and what you'll use it for. This isn't just about picking a number out of thin air; it requires a deep dive into your business plan and financial projections.

Different financing methods work better for specific purposes:

• Startup costs: These include significant upfront investments like equipment, inventory, licenses, and initial operating expenses.
• Working capital: Your working capital is the money that covers day-to-day operations. It is also used for payroll, inventory management, and keeping the lights on while you wait for revenue to come in.
• Growth and expansion: Capital needed for opening new locations, purchasing additional equipment, or hiring new staff to scale operations.
• Emergency funds: A safety net for unexpected expenses or cash flow gaps that could otherwise derail your progress.

Types of business financing

Running a business means wearing a variety of hats, and choosing how to fund it is one of the biggest decisions you’ll make. From steady, long-term investments to flexible options that help you handle day-to-day demands, here’s a look at the main ways business owners access capital—and what each one is built to do best.

Traditional bank loans

Bank loans remain one of the most common financing methods for small businesses, offering competitive interest rates and structured repayment terms. Traditional banks typically have access to cheaper funding, which can translate into lower interest rates for qualified businesses.

Who traditional bank loans are best for:

• Established businesses with strong credit and financial history
• Companies planning large, long-term investments
• Owners who can wait through a longer application process

Things to consider:

• Longer approval timelines and more documentation
• Stricter qualification requirements
• Limited flexibility compared to revolving or short-term options

Term loans

A term loan provides a lump sum of capital that you repay over a fixed period, typically one to ten years. These loans can work well for investments like equipment purchases, real estate, or major expansions where you know exactly how much you need upfront. Term loans can be offered by both traditional banks and online lenders, with differences in speed, qualification requirements, and access.

Term loans come with several benefits that can help your business grow:

• Lower interest rates: Often lower than short-term or alternative financing options.
• Predictable payments: Fixed monthly payments support consistent budgeting.
• Credit building: On-time repayment can help strengthen your business credit profile.
• Higher funding amounts: Suitable for significant investments.

Things to consider:

• Qualification requirements: Credit history, financial performance and, in some cases, collateral are typically reviewed.
• Approval timelines: Traditional lenders may take longer, though some online lenders offer more streamlined application and funding processes.
• Less flexibility: Repayment schedules are usually fixed.
• Personal guarantees: Some lenders may require a personal guarantee.

SBA loans

Small Business Administration (SBA) loans are partially guaranteed by the federal government, making them less risky for lenders and more accessible to small business owners who might not qualify for a traditional bank loan.

While the SBA doesn't lend money directly, it works with approved lenders to offer loans with flexible terms. SBA loans typically have longer repayment periods and competitive rates.

The most popular SBA loan programs include:

• SBA 7(a) loans:SBA 7(a) loans offer general-purpose financing up to $5 million, often used for working capital, expansion, or equipment.
• SBA 504 loans: Designed specifically for funding major fixed assets that promote business growth and job creation. These loans cannot be used for working capital, inventory, or debt consolidation or repayment.
• SBA Microloans: Smaller amounts up to $50,000 for startups and underserved communities, often accompanied by technical assistance.

Things to consider:

• Detailed application process: Documentation and approval can take time.
• Use restrictions: The funds must be used for approved purposes.

Business lines of credit

A business line of credit provides flexible access to capital up to a set limit. Unlike a term loan, you draw funds only when needed and pay interest only on what you use. This makes lines of credit well-suited for managing short-term cash flow needs.

A business line of credit can help you:

• Smooth seasonal fluctuations: The funds can cover expenses during slower periods.
• Manage unexpected costs: Use the money to address repairs or urgent expenses.
• Support ongoing operations: It allows you to handle working capital needs without borrowing upfront.

Things to consider:

• Variable interest rates: Costs may rise if rates increase.
• Discipline required: Easy access can lead to overuse.
• Possible fees: Maintenance, draw, or inactivity fees may apply.

Equipment financing

Equipment financing allows businesses to purchase or lease equipment while spreading payments over time. Because the equipment itself serves as collateral, approval is often easier to obtain than for unsecured loans.

This option works well for financing:

• Manufacturing or construction equipment
• Restaurant or medical equipment
• Vehicles and technology

Things to consider:

• Asset-based collateral: The equipment secures the loan.
• Term length tied to lifespan: Terms are usually one to seven years.
• Limited use: The funds must be used for equipment purchases.

Invoice financing

Invoice financing helps businesses access cash tied up in unpaid invoices while retaining control of collections. You borrow against outstanding accounts receivable and repay the advance when customers pay.

Invoice financing can be useful when:

• Customers pay on net-30, net-60 or longer terms.
• Cash flow is constrained despite strong sales.
• You want funding without selling invoices outright.

Things to consider:

• Fees based on time outstanding: Costs increase the longer invoices remain unpaid.
• Customer credit matters: Approval depends on receivables quality.
• Ongoing management required: You remain responsible for collections.

Invoice factoring

Invoice factoring involves selling unpaid invoices to a factoring company at a discount. The invoice factoring company assumes responsibility for collections and advances a portion of the invoice value upfront. This is not a loan, but a sale of receivables.

Invoice factoring may offer:

• Fast access to cash: You could have funds within days.
• Approval based on customers: There may be less emphasis on your credit profile.
• Cash flow relief: Factoring converts receivables into immediate funds.

Things to consider:

• Higher overall costs: Invoice factoring is typically more expensive than loans.
• Customer interaction: A third party handles invoice collections, which means customers make payments directly to the factoring company rather than your business.
• Limited applicability: Best suited for B2B invoicing models.

Business credit cards

Business credit cards provide convenient access to revolving credit for everyday expenses. Some may offer rewards or reporting features that support cash flow management and accounting.

Business credit cards are often used for:

• Routine operating expenses
• Short-term purchases
• Separating business and personal spending

Things to consider:

• Higher interest rates: Especially if balances carry over.
• Lower credit limits: Compared to loans or lines of credit.
• Credit utilization impact: High balances can affect credit scores.

Merchant cash advance

A merchant cash advance (MCA) provides upfront capital in exchange for a percentage of future credit card sales. Repayment fluctuates with daily sales volume, rather than fixed payments.

MCAs may appeal when:

• Speed is critical.
• Credit access is limited.
• Revenue is driven by card transactions.

Things to consider:

• Very high cost: Factor rates can translate to extremely high APRs.
• Cash flow strain: Daily deductions can pressure margins.
• Last-resort option: Often used when traditional financing isn’t available.

Personal financing options

During the startup phase, when business credit is still developing, many owners rely on one or more personal financing options.

Bootstrapping

Using personal savings (bootstrapping) gives you complete control without debt obligations or giving up equity. However, this approach limits your available capital and increases personal financial risk. If the business hits a rough patch, your personal retirement or emergency funds could be depleted.

Home equity loan

If you own a home, you can borrow against your equity, typically at lower interest rates than unsecured business loans.

Benefits:

• Lower interest rates
• Larger loan amounts

Things to consider:

• Your home serves as collateral
• Personal financial risk if business fails
• Reduces personal financial flexibility

Personal loans

Personal loans can fund business needs, though they typically offer smaller amounts and higher rates than business loans. They work best for smaller capital needs or when business financing isn't available. Be sure to check with the lender, as some personal loans have restrictions on being used for business purposes.

Family and friends

Raising money from friends and family can provide flexible, accessible capital, but mixing personal relationships with business creates risks. Always formalize agreements in writing to prevent misunderstandings that could permanently damage relationships.

Alternative financing

Beyond traditional methods, several alternative financing options serve small businesses that might not fit the mold of a standard bank borrower.

Crowdfunding

Platforms like Kickstarter, Indiegogo, and GoFundMe allow you to raise capital from many small investors or supporters. Crowdfunding works particularly well for consumer products, creative projects, and businesses with compelling stories.

Types of crowdfunding:

• Rewards-based: Backers receive products or perks in exchange for their contribution.
• Equity crowdfunding: Investors receive ownership stakes in your company.
• Donation-based: Supporters contribute without expecting returns, often used for social causes.

Online platforms

Online platforms connect borrowers directly with individual investors, often providing faster approval and more flexible terms than traditional banks. Rates and terms vary based on creditworthiness and platform, but this can be a viable middle ground between banks and high-cost alternative lenders.

Microloans

Nonprofit organizations and community lenders offer microloans (typically under $50,000) to startups and underserved entrepreneurs. These loans often come with business support and mentoring, making them a "smart money" option for new owners.

Equity financing

Rather than borrowing money, equity financing involves selling ownership stakes in your business to investors. This means no monthly payments, but you lose a portion of your future profits and decision-making power.

Angel investors

Angel investors are wealthy individuals who invest personal funds in early-stage companies, typically ranging from $25,000 to $500,000. Angel investors often provide mentorship alongside capital, leveraging their own experience to help you grow.

Venture capital investors

Venture capital firms invest larger amounts (typically $1 million+) in high-growth potential businesses. VC funding usually involves giving up significant ownership and some control over business decisions. This route is generally reserved for companies with the potential to scale rapidly and provide a massive return on investment.

Business grants

Business grants provide funding that doesn't require repayment or giving up equity. However, small business grants are highly competitive. The application process typically requires detailed business plans, and the grants may have specific eligibility requirements related to certain industries or demographics.

Where to find grants:

• Federal, state, and local government programs
• Corporate grant programs
• Industry associations
• Nonprofit organizations
• Business plan competitions

Identifying the right financing options for you 

View the chart below to compare several of the most common financing options to help you determine the best fit for your business goals.

Choosing the right financing option

When seeking business funding, consider the following factors when evaluating your choices and making a final decision.

Your business stage

The right funding option for you largely depends on where you are in your business journey.

Startups and early-stage businesses

New businesses often rely on personal or relationship-based funding before they have enough history to qualify for traditional loans. Options like personal savings, friends and family funding, microloans, crowdfunding or angel investors are typically more accessible at this stage.

For example, a new e-commerce business might use personal savings and a small microloan to cover initial inventory and marketing costs while building early traction.

Established businesses with operating history

Once a business has consistent revenue and financial records, more traditional financing options often open up. Bank loans, Small Business Administration loans, business lines of credit, and equipment financing are commonly used by established businesses to fund growth, manage cash flow or upgrade operations.

For instance, a restaurant with several years of sales history might use equipment financing to replace kitchen equipment or a line of credit to manage seasonal fluctuations.

High-growth, expansion-focused companies

Businesses aiming to scale quickly may look beyond incurring debt and consider equity-based financing. Venture capital or equity financing can provide larger amounts of capital to support aggressive expansion, product development or market entry, though it often involves giving up some ownership and control. As an example, a fast-growing software company might partner with venture capital investors to fund product development and expand into new markets.

Established businesses with operating history

Once a business has consistent revenue and financial records, more traditional financing options often open up. Bank loans, Small Business Administration loans, business lines of credit, and equipment financing are commonly used by established businesses to fund growth, manage cash flow or upgrade operations.

For instance, a restaurant with several years of sales history might use equipment financing to replace kitchen equipment or a line of credit to manage seasonal fluctuations.

High-growth, expansion-focused companies

Businesses aiming to scale quickly may look beyond incurring debt and consider equity-based financing. Venture capital or equity financing can provide larger amounts of capital to support aggressive expansion, product development or market entry, though it often involves giving up some ownership and control. As an example, a fast-growing software company might partner with venture capital investors to fund product development and expand into new markets.

Credit profile

Your personal and business credit scores significantly impact available options and terms. Businesses with excellent credit can access the best rates and terms, while those with challenged credit may need alternative lenders or secured financing.

Timing needs

How fast you need funds affects your choices:

• If funds are needed quickly: Faster options like business credit cards, merchant cash advances, or some online lenders may be available. Though, depending on the product and provider, they may come with higher costs.
• If you can wait a bit: Traditional bank loans or SBA loans may be worth exploring, since they typically offer more favorable rates but take longer to process.
• If timing is flexible: Taking time to compare options with longer terms and lower costs can give you more room to choose.

Actual financing costs

Different financing structures can price costs in different ways, so it’s important to understand how each option affects your bottom line.

Always look at the full cost, including:

• Interest rates or equivalent pricing: Annual Percentage Rate (APR) for loans, or factor rates and fees for some alternative options.
• Origination or setup fees: One-time costs to establish financing.
• Ongoing fees: Maintenance, servicing or usage fees that can add up over time.
• Prepayment penalties or early payoff terms: Some options charge fees if you repay early, while others do not.

Repayment terms

How and when you repay a loan can be just as important as how much it costs. Repayment structure should align with how your business earns revenue.

Common repayment approaches include:

• Fixed monthly payments: Offer predictability and make budgeting easier.
• Revenue-based repayment: Adjusts with business performance, increasing payments when revenue is strong and easing pressure during slower periods.
• Revolving credit: Provides flexibility by allowing you to borrow, repay and reuse funds as needs change.

Building a strong financing application

Regardless of which financing option you pursue, preparation is key. Lenders want to see that you are a responsible borrower with a clear plan for the future.

Here are some ways you can strengthen your application.

• Create a solid business plan: Your business plan should clearly articulate your business model, market opportunity, and growth strategy.
• Get your financial documentation in order: Prepare profit and loss statements, balance sheets, cash flow projections, and tax returns. Organized books demonstrate professional management.
• Build a strong credit profile: Check your credit reports, address any errors, and work to improve scores before applying.
• Consider your collateral: Identify assets you can offer as security to improve terms and approval odds.
• Determine how you will use your funds: Establish specifically how you'll use the capital and how it will generate returns. Lenders want to know how the money will help you repay the loan.

Managing multiple financing sources

Many successful small businesses use multiple financing methods simultaneously. For example, you might have:

• A term loan for equipment
• A business line of credit for working capital
• Business credit cards for everyday expenses

This diversified approach provides flexibility while matching each financing type to its most appropriate use. However, carefully manage total debt obligations to maintain healthy cash flow and avoid overextension. Keeping track of various repayment schedules and interest rates is crucial to maintaining financial health.

Fuel your growth with the right funding

The right financing option can make the difference between success and struggle. Whether you're launching a startup or expanding an established company, understanding your choices sets the foundation for more informed, business-aligned decisions.

And consider QuickBooks Term Loan and Line of Credit. These small business financing options can have a big impact for your business. Access funds fast and and pay no origination fees. Money choices shape momentum. When you’re clear on cost, timing, and access, financing stops being a constraint and starts becoming part of how you build.

QuickBooks Term Loan ("Term Loan") and QuickBooks Line of Credit ("Line of Credit") loans are issued by WebBank.

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