12 Financing Options for Growing Your Business | SunTrust Resource Center

Grow Your Business

12 Financing Options for Growing Your Business

12 Financing Options for Growing Your Business
 

When it comes time to expand your business, there are a variety of financing options to consider:

OPTIONS  WHAT IS IT?  ADVANTAGES  DRAWBACKS 

1. Traditional Loans

Loans and lines of credit from banks on standard terms

  • Larger loans
  • Favorable terms for bankable businesses

  • Not an option for start-up businesses
  • Credit terms

2. Self-funding

Financing the business from personal savings

or investments

  • Available to owners with savings and cash flow

  • Limited by personal assets and savings
  • Potential risk to retirement/savings

3. Friends and Family

Loans from individual’s friends and family

  • Prebankable option
  • Offer the possibility of favorable terms

  • Risk to personal relationships
  • Control and management can become issues

4. Vendor Credit

Leverages supplier payment terms financing and discounts

  • Inexpensive credit option
  • Good source of working capital

  • Limited by business scale and supplier credit

5. Credit Cards or LOC

Personally secured business

credit cards/lines finances

inventory and working capital

  • Available to owners with credit and assets
  • Prebankable option

  • Relatively expensive
  • Variable terms

6. Equity Investors (VC/ Angel)

Selling part of the company in exchange for growth capital

  • Growth capital for fast-growth companies
  • Governance and advice

  • Not an option for start-up companies
  • Not a loan
  • Give up future profits and control

7. Receivables Factoring

Sells receivables to commercial

finance company at a discount

  • Provides cash and reduces collections risk

  • Relatively expensive
  • Limited by volume/ customer creditworthiness

8. SBA Loans

Loans from banks guaranteed

by the government, often with

more favorable terms and

underwriting criteria

  • Flexible terms
  • Start-up option
  • Relatively large loan amounts
  • Variety of types

  • Need clear documentation
  • Requires motivated and experienced banker

9. Leasing

Reduces payments for capital

equipment/vehicles with lease

vs. purchase

  • Lower payments and improved cash flow

  • Generally higher cost of capital

10. Microlending

Smaller loans with more flexible

terms, underwritten by SBA and

bank pools; delivered by

community-based companies

  • Start-up option
  • Coaching/ technical assistance

  • Relatively small loans
  • Non-bank loans

11. Government Programs

Lending programs offered on

federal or state level such as the

USDA 

  • Flexible terms
  • Wide variety of options

  • Availability varies by region

12. Grants

Public policy cash grant awards

  • Do not have to be repaid

  • Limited to specialized fields

This content does not constitute legal, tax, accounting, financial or investment advice. You are encouraged to consult with competent legal, tax, accounting, financial or investment professionals based on your specific circumstances. We do not make any warranties as to accuracy or completeness of this information, do not endorse any third-party companies, products, or services described here, and take no liability for your use of this information.

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