17 Business Financing Options for Your Business (2025)

Looking for capital to fund a new business or get you to the next stage of business growth? Consider these business financing options.

Scaling a new venture will take you through some exciting milestones: your first sale, your first paid employee, your first physical location. As your business grows, you may find yourself making plans to expand your inventory, launch a new product line, or even take on a new geographic market or customer segment.

But growth comes with costs, and your business’s initial capital can get you far. But there are likely going to be cases where you’ll need some fresh financing.

Planning may be the difference between successfully scaling to the next profitable level—or growing your way into an unexpected bankruptcy. Planning involves knowing your options for business financing, should you need it.

What is business financing?

Business financing involves securing capital from third-party sources to fund a new or existing company. It is useful for seasonal gaps in sales, unanticipated downturns, and the challenges of growth and evolution. It is also useful for entrepreneurs who are starting a new business.

17 best business financing options

Type	Best For	Pros
Bank Loans	Established revenue	Easy to apply, fast funds
Online Loans	Businesses not qualifying for conventional loans	Convenience, fast funds, easier to qualify
Small Business Grants	Projects benefiting specific causes	No repayment, supports mission
SBA Loans	Businesses with good credit history	Favorable terms, free advice
Credit Union Financing	Lower interest rates, fewer fees	Lower rates, easier to qualify
Business Line of Credit	Steady track record	Flexible financing, revolving access
Crowdfunding	New ventures, one-time funding	Builds brand buzz, creates community
Microloans	Trouble qualifying for bank loans	Fast funds, low interest rates
Merchant Cash Advance	Working capital for emergencies	Repay as you earn, fast funds, easy to qualify
Cash Flow Loans	Few or no assets	No personal liability, large sums of capital
Business Credit Cards	Little or no credit history	Fast and convenient
Vendor Financing	Essential goods/services without collateral	Steady cash flow, easy to qualify
Equipment Financing	Boosting operational efficiency	No collateral, builds business credit
Angel Investors	Startups seeking quick funding	Strong backup, values-based investments
Venture Capital	Early-stage businesses accelerating growth	Risk-taking, assistance from investors
Family and Friends	No other financing options	Flexible terms, easier access
Self-funding	Keeping ownership in-house, limiting debt	No qualifications, no interest or fees

1. Bank loans

Best for: Businesses with established revenue

A private bank loan involves borrowing money from a bank that you can reinvest into your business. You can take out a small business bank loan or a personal bank loan, each with its own benefits and drawbacks. Borrowing for your business against your personal assets is risky, but it can be done.

The average personal loan interest rate ranges between 12.35% to 21.14% and small business loans range between 11.5% to 16.5% or more for traditional and online business financing lenders respectively.

Pros

• Easy to apply. The process of applying for a bank loan is straightforward and easy.
• Fast access to funds. Some banks issue loans within a matter of a few days, faster than many small business financing options for a small business.

Cons

• More requirements to qualify. Many banks require a long-standing and strong credit history, which makes it especially tricky as a startup business loan option.
• High interest rates. Bank loans have higher interest rates than other business financing options, especially if you don’t have a strong credit history.

2. Online loans

Best for: Businesses that don’t qualify for conventional loans

Online loans are offered virtually. Typically, lenders are financial services or related fintech companies, though many banks offer online loans as well. 

In 2023, application rates for loans, lines of credit, and merchant cash advances declined by 3% compared to 2022. However, approval rates are great—just over half of businesses were approved for their funding. 

Pros

• Convenience. When financing a business via online loans, there’s no need to visit a physical bank or storefront. You can apply for, receive, and manage the money digitally. The user interface is also usually better and more intuitive than more traditional lending options.
• Fast access to funds. Some online loans can grant you cash even quicker than a bank loan.
• Easier to qualify. Online loans often have more flexible qualification requirements than other funding options.

Cons

• High interest rates and fees. Because online loans are quick and convenient, they usually come with additional costs.
• Repayment qualifications. Many online loans come with a shorter repayment period.
• Limited funds. If you need a lot of cash, you’re better off exploring a different option, as online loans tend to have more limitations in terms of the maximum loan amount.

3. Small business grants

Best for: Projects that benefit specific causes

Small business grants are money given to entrepreneurs and small businesses by private, public, governmental, corporate, or individual entities. The business isn’t required to pay the money back, however, it’s typically mandated to use the funds in a certain way. 

The goal of a grant is to invest in a business that supports the investor’s mission and values. As such, each grant has its own requirements, and the amount of money available varies widely.

Pros

• You don’t have to pay it back. Small business grants are financial gifts, so the money is yours to keep and there’s no requirement to repay it.
• Contribute to a mission. Grants mainly exist to fund businesses that support the grant issuer’s vision and principles. This also gives you a sense of community.

Cons

• Competitive. Because grants are essentially free money, lots of small businesses pursue this route.
• Research and application process. It can be difficult to find grants relevant to your business—you’ll need to research the grants available as well as dedicate the time to preparing a worthy application.
• Limiting use of funds. Grants usually come with stipulations and requirements as to how you use the capital.

4. SBA loans

Best for: Businesses with good credit history

SBA loans are issued by the US Small Business Administration (SBA) through a variety of different SBA loan programs. These loans are a form of business debt administered by either the SBA itself or a member of its network of approved private lenders (with SBA-backed loans).

Some SBA loans offer fixed sums at a specific interest rate over an agreed repayment period and can be put toward a range of expenses. Other SBA loans are more specific in their purpose, such as commercial real estate or equipment purchases.

Pros

• Repayment terms. SBA loans often are among the most favorable in terms of repayment conditions. They also have capped interest rates.
• Free business advice. The SBA has Small Business Development Centers (SBDCs) throughout the country where you can meet with an SBA adviser. You can also solicit free advice through its SCORE business mentoring program.

Cons

• Difficult to qualify. SBA loans are harder to qualify for than other financial products from a commercial bank.
• Personal liability. If the business is unable to repay the loan amount, you’re personally liable to make up for it.
• Long, slow process. SBA loans require a lot of paperwork and often take a long time to administer funds.

5. Credit union financing

Best for: Businesses seeking lower interest rates and fewer fees

A credit union is a financial institution, like a bank, except it’s owned by a nonprofit financial cooperative made up of members rather than a commercial for-profit corporation. 

Credit unions offer many of the same products and services as traditional banks, and this includes capital for financing business. About 21% of small businesses borrowed or tried to borrow from a credit union or bank in Q3 of 2023.

Pros

• Low interest rates. Compared to traditional banks, credit union loans offer lower interest rates.
• Easier to qualify. Credit unions are smaller than most banks, and they focus on localized services. As such, they often have more flexible qualification requirements.

Cons

• Limited locations. If you prefer to visit a physical location when dealing with your lender, keep in mind credit unions often have a smaller footprint than larger banks with several branches and regions.
• Members only. Many credit unions only lend to people and businesses already a part of their institution. If you want to pursue this financing option, make sure you open a bank account or sign up for one of the credit union’s other products or services.

6. Business line of credit

Best for: Businesses with a steady track record

A business line of credit (LOC) works like a credit card, letting you borrow up to a certain limit and only pay interest on funds you draw. Once you repay the funds, you can continue to draw funds on the line as needed, as long as you pay on time and don’t exceed your credit limit.

Banks, credit unions, and online lenders offer business lines of credit, which can finance short-term needs, like covering payroll, buying inventory, or managing cash flow. 

You can apply for a secured line of credit by offering assets such as property, accounts receivable, or inventory as collateral. If you don't repay the credit line, the lender can seize or sell your assets. Alternatively, you can opt for an unsecured line of credit, which doesn’t need collateral, but can require strong financial standing to qualify.

Pros

• Flexible financing. You borrow money as needed rather than getting a lump sum upfront with a fixed repayment schedule.
• Revolving access. Business lines of credit offer quick access to funds when needed, which can help fill in cash flow gaps or meet short-term needs and expenses. 
• No monthly interest. You pay interest only on the funds you use, not the entire credit line.

Cons

• Varying requirements. Eligibility requirements and repayment terms vary by lender.
• Additional costs. Business lines of credit may carry extra costs like draw fees and maintenance fees.

7. Crowdfunding

Best for: New business ventures and onetime funding

Crowdfunding has become a popular method of raising money for startup businesses. It involves soliciting lots of donations from the public, rather than a large sum of money from one or a few contributors. Online crowdfunding sites, peer-to-peer payment platforms, and social media have made crowdfunding accessible to nearly anyone.

Crowdfunding sites like Kickstarter and Indiegogo are another way for small businesses to raise funding. When you use online campaigns to raise money, you typically offer gifts, rewards or other perks to the donors. Crowdfunding can also be a way to gauge interest in your product or service before fully launching your business.

You can often sweeten the deal for crowdfund contributors by offering a free product, swag, early access, or some other perk in exchange for their donation.

Pros

• Build buzz about your brand. Crowdfunding puts your brand on the map before you even have products for sale.
• Creates a community. Crowdfunding gives your audience a unique opportunity to contribute to the business in a meaningful way. You can nurture these relationships over time to create a community around your brand.

Cons

• Difficult to raise capital this way. Crowdfunding often requires a whole marketing plan for itself, which can be a big task to add to your list when starting a business.
• Third-party site fees. If you’re using a third-party crowdfunding platform like GoFundMe, you’ll likely have to pay fees to the site you’re using. So the money you raise isn’t all yours.

8. Microloans

Best for: Businesses having trouble qualifying for bank loans

Microloans are smaller loans of up to $50,000, though the average SBA microloan is around $13,000. The loan essentially matches borrowers with intermediary lenders—the lenders are nonprofit community-based organizations, each with its own loan eligibility criteria.

Pros

• Opportunity for under-represented groups. Microloans are specifically meant to be community-driven. You’ll often find financing options for women business owners, veterans, low-income entrepreneurs, and other minority groups.
• Fast access to funds. You can receive capital within a matter of days through a microloan.
• Low interest rates. Microloan interest rates vary depending on the lender, but average from 8% to 13%.

Cons

• Limited use. While you can use microloans to pay for things like working capital, inventory, supplies, and equipment, you can’t put it toward existing debt or use it to purchase real estate.
• Repayment period restrictions. The maximum repayment period is six years through the SBA, for example.
• Varying qualification requirements. Because there are different lenders, each microloan has its own requirements for eligibility.

9. Merchant cash advance 

Best for: Businesses seeking working capital for emergencies

A merchant cash advance (MCA) is a business financing option businesses repay as a percentage of sales, plus a small fee. It’s best for small businesses that need working capital and accept card payments from their customers.

MCAs essentially work by selling a portion of your future sales in order to have access to cash now. The company purchasing your future sales will usually automatically collect a portion of your daily or weekly debit and credit card sales, or a fixed payment every day or week.

Pros

• Only repay when you make money. Because of the way this financing option is set up, you only repay the loan as more cash flows into your business.
• Fast access to cash. MCAs are relatively quick and easy to get compared to other finance options. You can also use it however you like.
• Easy to qualify. MCAs are readily available to many entrepreneurs, regardless of credit history.
• Won’t hurt your credit score. If you make late payments, your credit score won’t be impacted.

Cons

• Frequent payments. These eat into your cash flow and profit margins.
• High interest rates. MCAs are repaid based upon a “factor rate.” The factor rate is often set up so you pay back as much as 150% of what you borrowed.
• Don’t build credit. Though this is an advantage if you have difficulty making payments, MCAs won’t help new businesses build credit.

10. Cash flow loans

Best for: Businesses that don’t own or hold many assets

A cash flow loan is a term loan offered by banks based upon a business’s forecasted cash flow. Rather than using the business’s or the person’s assets as collateral—reflected on the balance sheet—a cash flow loan is based on the cash flow statement. 

They’re particularly useful for service-based businesses, selling digital products, and businesses that don’t own or hold a lot of assets. They’re also handy for businesses getting ready to launch that don’t have many assets yet.

Pros

• No personal liability. Because these loans aren’t asset-based, you don’t have to worry about your personal assets being at risk.
• Large sums of capital. You can often borrow more via a cash flow loan than a traditional bank loan.

Cons

• Short repayment terms. Many cash flow loans require repayment in less than 10 years. They’re more ideal for short-term capital needs than long-term investments.
• Requires credit and/or business history. To qualify for a cash flow loan, you’ll need to show strong financial statements to prove projected income. Many lenders also look for good credit scores.

11. Business credit cards

Best for: Businesses with little or no credit history

Business credit cards are similar to personal credit cards, though they often come with higher limits and business-specific features. Opening a business credit card is usually a good idea, even if you don’t need access to funds, as it can help you establish a strong credit history, so long as you maintain on-time payments.

Pros

• Fast and convenient. Applying for and getting a business credit card is a relatively easy and straightforward process, especially compared to some of the other business financing options available.

Cons

• High interest rates.Credit cards typically have higher interest rates than other funding options like small business loans. It’s important to pay it back in a timely manner so you don’t pay a lot in interest.

12. Vendor financing

Best for: Purchasing essential goods or services without securing a loan or collateral

Vendor financing is when a vendor lends capital to a borrower with the stipulation that said capital is to be used for purchasing products or services from the lending vendor. This is the situation when someone “rents to buy” a property. 

As such, it’s a good option if you’re looking to purchase a retail storefront, warehouse space, production facility, corporate office, or other business property. You might also consider vendor financing when purchasing a business from someone else.

You also see this in inventory financing. This is when retailers borrow inventory from a supplier and pay them back at a later date for it, usually in installments. This is helpful for acquiring a lot of products or materials that will sit in the warehouse for some time prior to being sold.

Pros

• Steady cash flow and business operations. When it comes to inventory financing in particular, businesses can use this financing option to maintain smooth operations and avoid cash flow issues or stockouts.
• Easy to qualify. Many lenders in this type of setup don’t require long credit or business history.

Cons

• Bank hesitation. Depending on the lender, you might face trepidation. Banks in particular are hesitant to lend because collecting the collateral can be challenging in case of non-payment.
• Depreciation. While a property may appreciate in value, other assets like inventory or equipment may depreciate with time, lowering the value of what you borrowed.
• High risk. Borrowing in this way means you put a lot of collateral at risk, be it property, inventory, or other assets.
• High cost. Interest rates are also higher, and vendor financing typically comes with additional fees.

13. Equipment financing

Best for: Businesses looking to boost operational efficiency or improve profitability 

Equipment financing refers specifically to business loans taken out with the intention to purchase machinery or equipment for the business. This is a viable option if you’re looking to purchase equipment to take manufacturing in-house, cash registers and computers for a new retail store, or machinery to manage a large warehouse space.

You can also use equipment financing to lease equipment or to repair, maintain, or otherwise service machinery you already own.

Pros

• No collateral. Many equipment financing options don’t require collateral like traditional loans. This decreases the risk.
• Build business credit. Equipment financing impacts your business’s credit history, which can be good for young businesses with minimal financial history.

Cons

• Very specific use. You can only use this capital for purchasing business-related equipment. Any other use of the fund is prohibited.
• Pay more than the equipment value and cost. Because interest is involved, you’ll end up paying back more than the original cost of the investment.

14. Angel investors

Best for: Startups seeking quick funding to scale their businesses

An angel investor is a wealthy individual who provides funding for a startup, often in exchange for an ownership stake in the company. These investors will typically put anywhere between $25,000 and $500,000 toward an investment.

Pros

• Strong backup plan. Angel investors are a great option for entrepreneurs who don’t qualify for startup business loans or are too small to interest a venture capital firm.
• Values-based. In many cases, angels are more concerned with the commitment and passion of the founders and their larger market opportunity than aggressive growth.

Cons

• Requires a strong pitch. Because a return on their investment isn’t necessarily guaranteed, you’ll need to come up with a strong pitch to get people to hand over their money.
• Give up control. Because angel investors essentially become part-owners of the company, you’ll likely have to give up some sort of control and share some decision-making.

15. Venture capital

Best for: Early stage businesses looking to accelerate growth and profitability

Venture capital (VC) is a type of financing provided to privately held businesses by investors in exchange for partial ownership of the company. A VC is usually a firm of many members, whereas angel investors are typically individuals. Similar to angels, VCs typically take an equity, ownership, or stake in the company as their form of payment.

Pros

• Risk taking. While banks and traditional lenders are risk averse, VCs are more willing to take a chance. This is especially beneficial for high-risk industries.
• Assistance. Another difference from traditional lending, VCs have a more invested interest in the success of your business. As such, they likely serve on a board and have some sort of input into business decisions and plans.

Cons

• Pressure for business growth. VCs demand aggressive and rapid revenue growth from their investments.
• Very difficult to secure.Less than 1% of companies have successfully captured VC investments.

16. Family and friends funding

Best for: When other financing options are not available

Family and friends is an informal funding option with fewer‌ financial background requirements and cheaper, more flexible arrangements than traditional financing from lending institutions.

It’s generally more lenient and has no formal loan application process, but you may need a plan for how you’ll pay back a family member or friend if they offer you a loan. Otherwise, you might end up with strained relationships or unintended legal issues.

That said, you can receive support from family and friends through equity, gifts, or a standard loan. Ensure to structure the loan with an agreement to repay at an applicable interest rate to prevent any tax consequences for the person loaning the money.

Pros

• Flexible loan terms. A family member or friend can lend you money at a low interest rate and flexible repayment terms.
• Easier access. It’s easier to access the funds you need without a formal loan application process or high interest rates.

Cons

• No credit history. Loans from friends or family members typically aren’t reported to credit bureaus, so they won’t appear in your credit report or contribute towards your credit score. 
• Risk of damaged relationships. There’s the potential that getting a loan from family or friends could sour relationships, especially if things don’t go as planned.

17. Self-funding

Best for: Businesses looking to keep ownership in-house and limit debt

Self-funding, aka bootstrapping, typically means relying on your personal funds and resources to start a business rather than raising money through loans or investors.

Some personal funds or resources you may use include personal savings and credit cards, retirement accounts, personal assets, and personal spaces like a garage or extra room in your home. You can also withdraw Rollovers as Business Startups, or ROBS from your retirement accounts, or take a home equity loan to get your new business up and running.

Pros

• Zero qualifications. There are no eligibility requirements, like credit score, annual revenue, or time in business, which most other financing options require before lending you the funds.
• No interest or fees: With self-funding, you won’t accumulate debt or interest expenses and additional fees that come with a loan.
• Opportunity to test your business idea or model. You can test your idea or business model, refine your strategy, and build a customer base before committing to long-term financing. You’ll also accrue time in business and revenue, making it easier to qualify for future funding.

Cons

• Slower growth. Relying on personal funds and resources means you’re operating on limited resources, which may inhibit how fast your business can grow.
• Increased risk. Your business’s financing may not be 100% secured, so there’s an increased risk of failure, as you may lack funds to cover emergency or unexpected costs.

How to get business financing 

While each financing option has its own specific set of steps to follow, the general process of securing business financing goes like this: 

Improve your credit score

A good credit score indicates a strong likelihood you’ll deliver your end of the bargain, whether that’s paying back or something else. Establishing a strong credit history for your business is critical, and you should start from day 1.

TIP: Unfortunately, gender bias is rampant in small business funding, so women business owners will want to improve the likelihood of receiving funding as much as possible.

Have a plan

In business, few things are worse (or with as much potential to be unsuccessful) than having to scramble for capital on short notice. Planning well ahead of your anticipated needs is the smartest course.

Decide how much you want to borrow

Just how much to save, of course, is a matter of business judgment. Too little, and the cushion may be uncomfortably thin if and when something bad happens. Too much, and you risk starving your growth today to guard against an event that may never occur.

Prepare your pitch

There’s going to be an application and vetting process regardless of which business financing option you use. Get ahead of the game with some preparation. Put together a folder of files containing your business plan, financial statements, product catalog, and other relevant information. Then develop an elevator pitch to hone in on why your business is deserving of the funds you’re requesting.

Compare different business financing options

Don’t be afraid to shop around and get quotes from a variety of sources. You’re not locked into anything until you sign the paperwork. When you know your options, you can also use that information to negotiate better terms or rates.

Secure financing for your business

Knowing your industry and planning for the potential ups and downs you may face is a basic element in running a business. That planning should include anticipating your need for fresh capital and building an emergency fund for unanticipated needs.

Make sure you’re mentally and financially ready for this: if you are well prepared or work with financial partners who understand your business, who can make financing decisions quickly, and who can tune repayment (or equity) terms to your requirements, you’ll find it much easier to ensure your unique enterprise gets the kind of fuel it needs, exactly when it needs it.

Building a business is an incredible journey, after all. Who wants to run out of gas halfway?

Business financing FAQ

What is financing for a business?

Business financing occurs when an entrepreneur secures external capital to support a business need. It can come from traditional sources like bank loans and investors or non-traditional sources like crowdfunding.

What type of financing do small businesses use?

• Debt financing: Borrowing money from a lender, such as a bank, and paying it back over a period of time with interest.
• Equity financing: Raising money by selling a portion of the ownership in the business to investors.
• Crowdfunding: Raising money from a large number of people, usually via the internet, to fund a project or business.

What is the most common method of financing a business?

Taking a business loan is the most common financing method for a business owing to increased capital availability and flexible repayment timelines.

How do I finance a new business?

You can obtain financing to start a business through a variety of sources, including traditional bank loans, Small Business Administration (SBA) loans, online lenders, venture capital, angel investors, and government grants.

What is the best source of finance for a small business?

It depends on the purpose, amount you need, time frame, and your business’s track record (credit score, time in business). If you’re a new business with little or no credit history, an online loan might be your best option, while a bank or SBA loan might work for a small business with strong financial standing and established revenue. If you want to avoid debt altogether, self-funding, crowdfunding, or grants might be your best bet.