A Practical Guide To Funding Your Small Business With Business Loans And Beyond

by Sean Ludwig, Contributor & Lauren Wingo, Contributor

Whether you’re just starting your business or growing an existing one, there are a multitude of options for small business funding to help meet the needs of your unique situation. To help you understand how to fund a small business, this guide will detail startup necessities, outline funding options, and walk through what to consider when selecting a funding option.

Startup necessities

You should go into seeking funding for a new business armed with some information. First, decide what’s on your "need" list and what’s on your "it can wait" list. Pose the question this way: What is the bare minimum required you need to get your venture off the ground?

At the same time, you can’t skimp on the necessities. This will, of course, be a major investment. So, if — when thinking through your new business venture — you put something on the "it can wait" list, check with other areas that may be affected if that area doesn’t get funded.

Here are some common business expenses and the questions surrounding them to consider before trying to secure funding:

Payroll — How many employees do you have, what are you paying them, and how many employees will you have in the next six months? Startup and small businesses don’t always stay small, so think about how many people you will need to start, but also how many you may need before you start making a profit. Also, consider how you’re going to pay yourself. As the founder of the small business, you need to live, too.

Insurance — Is your business prepared if disaster strikes? Will you be offering health insurance to your employees?

Licensing, permits, and taxes — Doing business costs money and you want to make sure you won’t be running into any legal trouble. How much capital do you need to cover licenses, permits, and taxes?

Rent and utilities — If you’re moving your business into a physical space, make sure you can afford your lease and utility costs to keep things running. Make sure you clearly understand the terms of a commercial lease before signing a contract.

Equipment — Do you need computers, phones, machinery, or other forms of equipment? Is renting or leasing equipment a possibility? Can you get equipment used? How much personal protective equipment (PPE) do you need to buy to protect worker and/or customer health?

Inventory and upcoming orders — Do you have enough raw product to make your business continue to operate? If you don’t, should you be investing in more?

Advertising and website — You have to let people know you exist, and this doesn’t happen without advertising and a good website. Perhaps you will buy social media ads, rent billboards, put an ad in a local magazine, or optimize your site for the best search engine results. All of this costs money.

All the extras — Will you or your employees need to travel? Are there consultants in your field you should pay for some advice? Will you need a lawyer on retainer or to handle any sort of small business matter such as obtaining a copyright or trademark?

Types of small business funding

There is no "right" way to fund your business, whether you’re looking for startup funding or to maintain or grow your existing business. Some types of funding work better for different stages of your business, and sometimes the right answer might be a combination of funding types.

Small business grants to consider

Many government entities, corporations, and nonprofits offer money for people to launch or grow small businesses. Some small business grants are open to any small business while others are targeted to specific demographics, like businesses owned by minorities, women, or veterans. The website Grants.gov also serves as the largest database for federal grant opportunities.

Government grants

Government grants are available for small businesses at the federal, state, and local levels for a variety of different business types and circumstances. A few examples of government grants include:

U.S. Department of Commerce Minority Business Development Agency (MBDA): MDBA loans and targeted grants are designed to help minority-owned businesses grow.

Farmers Market Promotion Program: Businesses in the agricultural sector can benefit from the Farmers Market Promotion Program, which aims to increase applicable marketplaces and manufacturer-to-consumer products. These businesses can receive educational resources, training, and financial support.

Small Business Innovation Research Program (SBIR): The SBIR Program provides grants to small businesses with the ability to perform federal research for the potential to curate profit-oriented goods and services.

General small business grants

Nonprofit and larger corporations offer grant opportunities and other funding options to small businesses based on their eligibility and industry. Here are a few general small business grants to consider:

Business Warrior: Business Warrior’s mission is to provide small businesses with direct access to capital at low-interest rates and with short approval times.

GoFundMe Small Business Relief Fund: GoFundMe assists qualifying small businesses that were negatively impacted by the COVID-19 pandemic.