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7 Business Funding Tips Small Business Owners Don’t Know

Having access to funding is vital to the success and growth of small businesses. Unfortunately, obtaining capital, at least through conventional means, is becoming increasingly difficult. 

For example, the approval rate for small business loans from small banks was just 21.2% in late 2022, while it was a mere 14.5% from big banks.

Here are some lesser-known business funding tips that can help you secure the capital you need without relying on traditional financing.   

1. Build Your Personal Credit Score to Boost Your Funding Opportunities 

One of the most significant, yet surprising, factors to some in determining funding eligibility, rates, and interest is your personal credit score. 

If you have a score of 700 or higher, it’s much easier to secure solid lending than if your score is 680 or less. That’s why building your credit score should be a top priority before and during the launching of a small business. 

Here’s a breakdown of the five biggest factors that impact your personal credit score, according to Freddie Mac. 

  • Payment history – 35%
  • The debt you currently owe – 30%
  • Credit history length – 15%
  • New credit you apply for – 10%
  • Credit mix – 10%

Based on this ratio, keep working to build your personal credit score because it should open more doors for funding your small business. 

2. Build Your Business Credit

Just as personal credit affects your eligibility, so does your business credit. More specifically, it determines how appealing you are to lenders as a potential borrower, your interest rate, and more. 

So if you have good business credit, you’ll be in a much better position to secure the funding you need while getting favorable terms. 

But how exactly do you build business credit?

First, you’ll want to get an EIN if you haven’t done so already, open a business banking account (separate from your personal banking account), and register for a D-U-N-S number from Dun & Bradstreet. 

Also apply for business credit cards and open business tradeline accounts that report to business credit bureaus like Dun & Bradstreet, Equifax, and Experian.

3. Apply for an Alternative Business Card if You Have Subprime Credit 

Let’s say that your credit — personal and/or business — is less than ideal. You’re currently working to improve it, but it’s hindering you from being approved by many lenders. What do you do?

An innovative new option that’s catching on for business owners with subprime credit is using a business card and flex line from a lender like Revenued. 

Rather than focusing on your credit score, they look at your business revenue, making it ideal if you have lackluster credit but bring in at least $10,000 each month. 

If you’ve been struggling to be approved for conventional business cards up until now, Revenued may be right up your alley. 

4. Use Invoice Financing to Get Paid Faster

A common issue for many small business owners is getting invoices paid promptly. While some businesses, for instance, have net 30 payment terms where invoices are paid within 30 days, others have much longer terms of 60, 90, or even 120 days. 

The problem with waiting to get paid is that it clogs up your cash flow and makes it harder to reinvest in your business. 

One solution worth considering for slow-paying clients/vendors is invoice financing, where you borrow against the money you’re owed. 

With invoice financing, you pay a percentage of the invoice as a fee for borrowing the money, but you can get paid much quicker, within 24 hours in many cases. 

5. Turn to Microfinancing for Quick Funding Injections

Let’s say you need business funding but nothing massive — a max of $50,000. Microfinancing, which is basically a smaller version of a traditional bank loan, is something to consider. 

While it’s probably not viable if you need to rapidly scale your business, it can be a great option if you just need a “funding injection” for something like new equipment, a critical inventory order, or new supplies.

A few key benefits of microloans are that they’re easier to obtain than larger traditional loans, have less interest, and are easier to pay off. And as long as you make your payments on time, they can help build your business credit for additional funding opportunities. 

SBA.gov can give you a list of SBA-approved microlenders.

6. Capitalize on Increasing Fintech Funding Options

The fintech industry has exploded in recent years. Increasing competition among fintech lenders has created abundant opportunities for small businesses and can be instrumental in fueling growth. 

While you can’t usually expect major funding, as most fintech loans max out at $150,000, this can still be helpful for obtaining critical financing without having to go through traditional banks. 

And there are some notable benefits which include quicker decisions regarding eligibility, faster access to funds, and customizable options for funding your business. 

You can find a list of 34 of the top fintech lending companies here.  

7. Use Equipment Financing to Get Equipment 

An integral part of sustained growth is obtaining essential business equipment like heavy machinery, technology systems, vehicles, and even office furniture. 

But it’s easy for small business owners to run into problems when attempting to pay outright. Or, if you wait to buy equipment until you’ve generated enough profit to reinvest, you may miss out on critical growth opportunities. 

A great workaround not everyone knows about for acquiring important equipment right away is equipment financing where you use a loan to purchase business-related equipment and make installment payments along with interest over a fixed term. 

This typically doesn’t require a high credit score because it is less risk to the lender since they can repossess the equipment if payments are not made on time.

While you don’t want to go through just any lender and should be mindful of interest and fees, this can be a viable solution for many small businesses and help you get the equipment you need to scale at a healthy rate. 

And given the current inflation rate, it can help you lock in fixed payments that you might not be able to take advantage of otherwise.