The truth is that most small business owners have to bootstrap to at least get some financing from their own assets or credit. This really isn't ideal because it can limit growth and subject the owner's personal assets to a lot of risk. However, some traditional sources of small business loans aren't as easy to obtain as they used to be. It's best to consider a variety of small business lenders in order to find the one that best meets the needs of a new and growing company.
Of course, many people in the U.S. consider banks and the Small Business Administration as one of the best small business lenders. While the SBA doesn't actually loan money, it helps back loans to make them less risky for banks. This can help small business owners get approved with a lower interest rate. The problem is that the SBA and banks both like to see a track record in business of at least a couple of years, so most SBA lending won't really work for startups.
Online lenders may provide a better options for small companies that have done some business but haven't had a chance to establish business credit. Business owners can apply online and typically get lending approvals within a few minutes. The online lender will ask the business owner to link some proof of their legitimacy to the application. For instance, business owners might use their PayPal or business checking account to help them get an approval.
Investors offer a third solution. The good thing about finding investors is that they don't actually require the business to take on more debt. The reason that some entrepreneurs would rather not take this route is because most investors are going to want to have some control over the company in exchange for funding.
Factoring offers another option for businesses that accept credit cards. This isn't actually a loan because the company really sells future receipts in exchange for quick financing. Naturally, the factoring company will want to earn a profit, so the fees can be quite high and burdensome for a new or growing company to absorb. The benefit is that this is another funding solution that doesn't require on good credit.
Some business owners find that business credit cards can provide them with a convenient way to pay bills and manage cash flow. If the business can qualify for a business card with a good introductory offer, they may even be able to use funds without paying interest or fees while the introductory period lasts. Of course, new businesses probably won't get approved for a high credit limit. After introductory periods end, fees and interest may be quite high.
It's important for small businesses to obtain plenty of funding to help manage cash flow. The right solution really depends upon the length of time the company has been in business, business goals, and the company's business credit scores. The only sure thing is that it's best to establish business credit as quickly as possible in order to take advantage of loans from the right small business lenders when they are needed.