7 Funding Sources to Help Kickstart Small Business Growth

You’ve made the decision to start a business. Now what? 

According to Holly Wade, Executive Director of the National Federation of Independent Business (NFIB), identifying and securing one or more key funding sources is a must before lighting the “Open for Business” sign.  

“Most people starting a consulting business generally rely on personal savings or money from family, but those opening a retail business, restaurant, or one that requires an investment in equipment and employees will often need small business loans from a local bank or the Small Business Association,” said Wade.  

The “2021 Small Business Trends” report by Guidant Financial notes that just 39 percent of entrepreneurs saved enough money to independently fund their start up. The balance of burgeoning small business owners will need to explore the variety of available options to help fund their business. 

Wade notes there are seven best sources to fund a new business or help grow an existing small business. 

Build a Relationship with Community Bank 

Developing a relationship with a community bank lender is one of the first steps entrepreneurs should take to get financial help when starting a new business. Community banks are often more focused on small business development in their service area, making them receptive to new business funding needs. 

Wade says business owners should schedule time with their banker—long before they need something—to help them better understand what’s happening with their business, future plans, what bank programs may support growth plans, and how the business owner might get involved with the bank’s community engagement activities. 

“Whether it's financing a business expansion or a large capital expenditure, or even just extra working capital, knowing who to talk to at your bank certainly helps you receive the best financing terms and conditions available. While small business financing is becoming more automated, nothing helps more than knowing who you can call at your local bank,” said Wade. 

Small Business Administration Loans 

The Small Business Administration (SBA) is one of the main sources of funding options for many small businesses. There are a variety of SBA loan programs available to small businesses, including: 

7(a) Loan. The 7(a)-loan series is the SBA’s most common loan and includes financial help for small businesses with special requirements. The program can be used for short- and long-term working capital; refinancing current business debt; or purchasing furniture, fixtures and supplies. The maximum loan amount for a 7(a) loan is $5 million. 

Microloan. A microloan provides up to $50,000 to help small businesses and certain not-for-profit childcare centers start up and expand. The average microloan is about $13,000, with most loans used to help rebuild, re-open, repair, enhance or improve a small business. 

CDC/504 Loan. Th 504 loan program provides long-term, fixed-rate financing of up to $5 million for major fixed assets that promote business growth and job creation. 504 loans are available through Certified Development Companies (CDCs), community-based partners who regulate non-profits and promote economic development within their communities. 

Minority Business Development Agency 

The U.S. Department of Commerce Minority Business Development Agency (MBDA) is the only federal agency solely dedicated to the growth and global competitiveness of minority business enterprises. The MBDA provides a variety of services for minority businesses, including connecting them to private lenders, including banks, mutual funds and investors.  

Additional Assistance Available to Help Small Businesses Get a Jump-Start on Success 

While small businesses often need funds to help during start-up and expansion, a need also exists for advice and direction regarding a variety of business issues. Fortunately, there are a number of organizations that provide services and assistance small businesses often need to improve their chances for success.   

Small Business Development Centers 

Small Business Development Centers (SBDC) a partner program of the SBA, is a national network of nearly 1000 local SBDC centers that provide no-cost business consulting, low-cost business training and access to capital for small businesses. 

Office of Veterans Business Development 

Devoted exclusively to promoting veteran entrepreneurship, the Office of Veterans Business Development (OVBD) facilitates the use of all SBA programs by veterans, service-disabled veterans, reservists, active-duty service members, transitioning service members, and their dependents or survivors. 

SCORE 

SCORE is the nation’s largest network of volunteer, expert business mentors, dedicated to helping small businesses get off the ground, grow and achieve their goals.  SCORE is a resource partner of the SBA and has local chapters throughout the U.S. 

Small Businesses Don’t Need to Go it Alone 

For many small business owners, it can often feel like they are on their own when it comes to making the right decisions to establish and grow their business. But Wade said today’s entrepreneurs have plenty of help available. 

“Certainly, obtaining the necessary funding is one of the first steps to starting a business, but the good news is there are plenty of resources out there to help entrepreneurs obtain the financing they need,” said Wade.  “Fortunately, there are also plenty of organizations locally and nationally that can provide business owners with the additional services and counseling they need to help them be successful with their business venture.”