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Understanding Top Financing Options For Small Business Owners

After developing a brilliant business plan, the next major hurdle most small business owners face is raising the capital to start and run the business. If you’re stuck as far as accessing financing, we’re here to help.

We’ll walk you through traditional lending channels and alternative online financing avenues. We’ll expose you to creative loan options like ITIN loans available to small business owners who don’t have Social Security Numbers (SSN) but only have an ITIN-number.

Conventional Financing Options You Can Opt For

1.    SBA loans

Conventional lenders and banks administer SBA Loans. The U.S Small Business Administration (SBA) partially guarantees these loans to enable lenders to advance the loans are lower rates. You can use SBA loans to buy or expand a business, purchase equipment or property, and recover from disaster.

Typically, SBA loans are more accessible to small businesses due to relaxed requirements than traditional bank loans. They usually have more extended repayment periods with lower down payment requirements. These loans are capped at a maximum of $5 million.

Types of SBA loans:

  • SBA 7(a) loans.
  • SBA 504 loans
  • SBA disaster loan

2.    Term loans

You can approach traditional banks for term loans. The lender advances a lump sum of cash that you repay in installments of a predetermined period with term loans. ITIN loans are an example of term loans.

When you’re looking at investing in costly assets such as land, heavy machinery, or motor vehicles, you go for long-term loans that are repayable in at least six years. When you need to borrow for short-term cash needs or working capital, then go for short-term loans that are repayable in below two years. Medium-term loans fit in between the two.

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3.    Equipment financing

The lender advances the loan for equipment purchase with equipment financing and uses the equipment as collateral. Most small businesses get approved for this type of loan since the equipment is used as collateral.

4.    Lines of credit (LOCs)

With lines of credit, businesses can access capital quickly whenever in need. There are no fast rules on what you use the money for so long you service the interest within the agreed period. Different banks have varying requirements to approve your business for LOCs.

5.    Invoice financing

Invoice financing allows your business to get an advance on unpaid invoices. Lenders may advance up to 85% of the invoice amount then remit the balance less any fees you charge.

6.    Merchant cash advance

Here, merchants offer your business a loan in anticipation of future credit card sales. It’s a quick way of accessing cash deducted from a portion of your daily credit card sales. Though convenient, it’s fairly costly.

Online Financing Choices For Small Businesses

The main advantages of online lenders are their flexible terms, fast funding, and relaxed eligibility criteria.

1.    Crowdfunding

Online platforms like Kickstarter, GoFundMe, and Indiegogo provide a financing option for small businesses. Small businesses pitch their business idea and attract financial support from many small investors to reach their funding goals.

2.    Online lenders offering microloans

Some online lenders offer microloans to upcoming entrepreneurs who may not have the collateral or credit scores to support traditional borrowing.

Examples of fintech firms that offer microloans include Kabbage, Kiva, Funding Circle, and Camino Financial. The latter offer ITIN loans for small business owners without an SSN but with an ITIN number.

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3.    Invoice financing or factoring

Online cash flow management companies such as Fundbox give an advance to small businesses on outstanding invoices. This allows the business to continue its operations while awaiting payments from its customers. The firm settles the loan amount when it receives payments from its customers.

Other Kinds Of Financing Options: Grants For A Small Business

Research available grants in your locality and find out if your business is eligible to participate. It’s worth getting an experienced grants writer to help you draft a persuasive proposal for the grant.

Grants for small business owners:

  • Government grants:
  • SBIR Program
  • NASE Growth Grant
  • Eileen Fisher Women-Owned Business Grants
  • Amber Grant
  • The Girlboss Foundation Grant
  • MBDA Grants
  • FedEx Grant Contest


Financing is critical for starting and running any business. Your business ideas can get a new lease of life thanks to the numerous financing options available with the intent of technology. Tap into plenty of funding options today from conventional lenders and online financiers regardless of your business size.