Get the financing you need – Forbes Advisor


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Business financing can give your small business the boost it needs to thrive (and sometimes survive). Still, there are many financing options for businesses, and some business owners may feel overwhelmed by the number of choices.

Finding the best business financing option for you will depend on several factors. Below is an overview of eight popular business financing solutions, along with the pros and cons of each to guide you through the research process.

Find the best small business loans of 2022

1. Online loans

Gone are the days when you had to go to a physical financial institution to take out a business loan. Today, it is easy to find online non-bank lenders that offer business loans that you can apply for from the comfort of your home or office.

Loan limits, repayment terms, interest rates, and fees can vary widely depending on the online lender you work with and the type of loan. And you can use this type of financing to cover a wide range of expenses, such as working capital, expansion costs, debt consolidation, and the purchase of inventory or equipment.

Online business loans can offer more flexible approval criteria than traditional bank loans. According to Federal Reserve Data81% of business loan applicants were approved for at least one financing from online lenders before March 1, 2020. This figure dropped to 55% after March 1, 2020 (but approval percentages with other funding sources at that time as well) .

With online loans, your business may be able to access funding faster, assuming it is approved. But, of course, the speed and flexibility of loans often comes at a price.

Advantages and disadvantages of online loans

2. Traditional bank loans

Business loans from traditional financial institutions, like banks and credit unions, remain a popular way to borrow money. For qualified borrowers, traditional bank business loan interest rates tend to be a more affordable option.

However, it can be difficult for some businesses to qualify for bank loans, especially for new startups or those without established business credit. Even poor personal credit ratings could be an obstacle when applying for this type of business financing.

Advantages and disadvantages of bank loans

3. SBA Loans

Loans backed by the United States Small Business Administration (SBA) tend to be one of the most affordable ways to access business financing. With SBA loans, the federal government guarantees part of the loan. This makes lenders more comfortable approving borrowers who might otherwise appear to be a risky investment.

The SBA itself does not issue loans. Instead, you’ll need to contact an SBA-approved lender to apply. But like traditional bank loans, you may need to go through many steps to qualify for this form of business financing.

If you qualify, however, your business may be able to borrow up to $5 million. Repayment terms can extend up to 30 years with some SBA loans, and you can get financing with a down payment as little as 10% of the loan amount.

Advantages and disadvantages of SBA loans

4. Commercial lines of credit

A business line of credit provides a flexible way to borrow money as needed. If you don’t know in advance the exact amount your business needs for a project, or if you’re looking for a permanent source of capital, a business line of credit might be worth considering.

Like a credit card, you can use a business line of credit to borrow funds up to your account’s credit limit. As your business repays the funds it borrowed, it can access the line of credit again, up to the limit. When the draw period expires, you will no longer have access to the line of credit.

Commercial lines of credit are available from traditional financial institutions and online lenders. So the specific approval criteria you meet, as well as interest rates and borrowing fees, can vary widely from lender to lender.

Advantages and disadvantages of commercial lines of credit

5. Business Credit Cards

Business credit cards are another flexible way to access financing and establish business credit. This type of financing may also be easier to obtain, especially if you have good personal credit scores (at least 670). For this reason, business credit cards can be a great tool if you’re looking for a way to establish business credit.

Of course, credit card interest rates can be high for even the most qualified applicants. The average credit card interest rate for November 2021 was 14.51% (based on Federal Reserve Data for accounts that assess interest). This number represents consumer credit cards. Business credit card interest rates can be a bit higher, but they also depend on your personal credit score and other factors.

Advantages and disadvantages of commercial lines of credit

6. Small Business Grants

Small business grants are a funding option that can be appealing to any business owner. The main appeal of grants is that you don’t have to pay them back, or give up some of your business capital to secure the funds. These are basically free money.

On the negative side, you are likely to face stiff competition when applying for small business grants. Thus, you may need to complete numerous applications (some of which may be detailed and time-consuming) if you hope to have your business selected for a cash prize. Grants tend to be long when it comes to business funding, but they’re hard to beat if your business can qualify.

Advantages and disadvantages of grants

7. Invoice factoring

For businesses that provide services or products to other businesses, invoice factoring is another way to access financing. With invoice factoring, your business sells its unpaid invoices to a third party. This third party – a factoring company – gives you some of the money up front in exchange for these invoices. Then it collects payments from your customers and gives you the remaining balance minus a percentage called a factor fee.

The creditworthiness of your customers matters more than your own company’s credit ratings when it comes to this type of financing. So even with bad credit or no established credit, you might qualify. Yet, as you may encounter other sources of non-traditional business financing, the cost of borrowing can be high with invoice factoring.

Advantages and disadvantages of invoice factoring

8. Crowdfunding

Crowdfunding is an out-of-the-box way to raise money for your business goals. Several crowdfunding options include: crowdfunding the debt you pay off; equity crowdfunding where you seek investors; reward crowdfunding that provides benefits to donors; and donation-based crowdfunding.

Depending on the type of crowdfunding you are interested in for your business, you will want to find an appropriate platform to manage your campaign. A few options:

Each type of crowdfunding has its pros and cons to consider. With donation crowdfunding, for example, you don’t have to pay back the funds your business receives or share your business equity in exchange for investments. But getting the word out and getting others to donate for your business goals can be tough.

Advantages and disadvantages of crowdfunding


Researching the different types of business loans and other financing options puts you in a better position when you need access to business capital. From there, you can take the time to review the steps to qualify for a business loan before you start filling out applications.

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