The US Small Business Administration (SBA), defines a “small business” as a company with less than $750,000 in annual revenues and hires less than 250 employees. With this low level of annual earnings, some small business owners may worry about finding the best small business financing options for them. Well, worry no more!

If you’re one of these small business owners, check out our guide on these five small business financing options you may have never heard of before. Do your homework today to find which funding option is right for your business.

Small Business Financing Options

There are several different types of small business financing on the market today. These alternative financing models are an option to traditional bank and government small business loans. These models include:

1. Business Line of Credit

With this financing tool, your bank agrees to fund you a certain amount on the condition you repay the balance before your next billing cycle begins. If you can’t repay the amount, you incur service fees and interest on the remaining balance. Business owners with outstanding credit history usually have no problem qualifying for a business line of credit.

2. Crowdfunding

Crowdfunding provides small businesses a platform to advertise one, company project and request financing from friends, individual investors or family members. Crowdfunding comes in three forms; rewards-based donation-based or equity-based financing.

Rewards-based financing provides investors with either one of your products or services as a “reward” for their contribution. Donation-based initiatives offer no rewards or monetary return to investors. Equity-based funding entitles investors to become a co-owner of your company.

3. Invoice Financing

Invoice financing is an option when a financial company pays you for your pending sale invoices. You submit your outstanding invoice to the financing company, and they pay you the amount owed minus their fee. When the client pays you back, you then pay the lender back.

Invoice financing lender fees usually range between two and five percent of the invoice total. These lenders will often lend you a substantial portion of the total value show on your invoices.

4. Merchant Cash Advance

A merchant cash advance payment is a flexible tool for companies that have consistent point of sale (POS) or credit card transactions. A financing company sends your cash in exchange for a portion of these regular debit or credit card sales. These finance companies will charge a fee for their service and require short-term repayment schedules.

5. Small Business Grant

Does this sound like a small business financing dream come true? The government will provide you with a small amount of start-up money and you don’t have to pay it back. That’s called a small business grant.

Government agencies will award small business grants to those companies that help promote the local economy for their citizens. Both governmental agencies and small businesses set up pre-defined terms and goals on how both the company and the community will benefit.

Next Steps

Are you ready to try one of these small business financing options yourself? If so, then you can start right now. Head over to the US Small Business Administration website to see if your business fits the size standards for a “small business.”

You can also visit our website for more helpful tips on alternatives to small business financing. Consider us a partner invested in your success!