How to Finance a Small Business

Four Methods:Work with the Small Business AdministrationApply for Loans Through Commercial LendersQualify for Government GrantsSeek Out Specialized Financing

Several methods are available to those looking to finance a small business. Initial funding may be dependent on the owner's credit score. Over time, a business credit score will be developed for future financial needs.

Method 1
Work with the Small Business Administration

  1. Image titled Finance a Small Business Step 1
    The U.S. Small Business Administration (SBA) offers excellent financial resources for start-ups and small businesses. Loans that can be used for a variety of businesses are widely available at low, fixed rates and flexible terms.
    • Small Business Administration financing is only available to those starting a business in the United States.
    • The SBA's Basic 7 (a) Loan Program offers flexible lending services. Borrowers apply for the loan through participating lending institutions. The SBA provides insurance to the lender for providing the loan.
    • These loans may be used to purchase equipment, real estate and inventory or as working capital.
    • Additional loan programs offered by the SBA include the Microloan Program, for those businesses unable to qualify for other loans, and the 504 Loan Program, offering a long term financing option for land and building purchases.

Method 2
Apply for Loans Through Commercial Lenders

  1. Image titled Finance a Small Business Step 2
    Many financial institutions offer financing for small businesses. Start-up and established businesses may apply with local or national lenders.
    • Interest rates from commercial lenders vary based on credit scoring.
    • One of the best resources for businesses is their bank. The working relationship with a financial institution can be helpful when obtaining a loan.
    • Ensure the lender is aware of the business' success by providing a professional business plan. Business plans outline the management, profit margin and other details of the business' organization. This answers the lenders' questions about how likely the business will be to repay the loan.

Method 3
Qualify for Government Grants

  1. Image titled Finance a Small Business Step 3
    Government grants are available for financing new businesses in many countries, including the United States and the United Kingdom. The qualifications for these grants are specific to the grant.
    • Government grants do not need to be repaid as long as the institution meets the requirements of the small business.

Method 4
Seek Out Specialized Financing

  1. Image titled Finance a Small Business Step 4
    Associations may offer specialized finance options for qualified individuals. For example, the Small Business Administration and the U.S. Department of Veterans' Affairs offer financial aid for veterans.
    • Local groups and organizations may offer special financing for members.
    • Credit unions are another source of business finance for members.


  • Some credit card lenders offer loans large enough to be used as working capital or for other needs of the business. These loans have a higher interest rate, but may be an option for businesses without an established credit history.
  • Compare a variety of loan options. Look for lenders offering the required credit line with the lowest interest rate possible.
  • Obtain a mortgage for any real estate or land purchase rather than unsecured loans. Mortgages have lower interest rates than most unsecured loans.
  • The SBA loans are a good option if a business owner or the business has a poor credit history. Some of these programs provide business owners, who would not normally qualify for a loan, with a low interest, fixed term loan.

Sources and Citations

Article Info

Categories: Funding