Sign in

Types Of Small Business Financing You Should Know About

Elevar Accounting
Types Of Small Business Financing You Should Know About

Starting and running a small business is an empowering feeling. However, just like every other job, managing the functioning of a small business can sometimes be overwhelming. 

But how do you fuel your small business endeavour and propel it forward? The key is having access to the right financing options. 

Additionally, collaborating with professional accounting services for small business can be helpful.     

In this blog post, we'll explore the different options for small business financing.     

What is a business loan?

A business loan represents a financial product designed to provide funding for your small businesses. It allows entrepreneurs to borrow a specific amount of money, which must be repaid over a predetermined period.  

Business loans are commonly offered by banks, credit unions, and various alternative lenders. 

You can consult an accounting services provider to get insights about what is the right type of financing for your business.  

When is the correct time to get a small business loan?

To determine the right time to apply for a small business loan, it's essential to assess your business's financial health and evaluate your specific needs. Some situations where obtaining a small business loan might be appropriate include:

  • Expansion: If your business has a growth opportunity, such as opening a new store or launching a new product line, a business loan can provide the necessary capital.

  • Equipment and inventory: To invest in equipment, purchase inventory, or upgrade technology, a business loan can help cover the upfront costs.

  • Seasonal fluctuations: If your business experiences seasonal fluctuations in revenue, a business loan can bridge the gap during slower periods.

  • Cash flow management: When unexpected expenses arise or to manage cash flow gaps, a business loan can provide short-term relief.

When you collaborate with experienced accounting and bookkeeping services for small business, you get detailed reports of your businesses' financial health and understand when is the right time to seek financing. 

Debt or equity finance – which one to choose for your small business?

When considering financing options for your small business, you'll encounter two primary types: debt finance and equity finance. 

Debt Finance

  • Debt financing involves borrowing money that needs to be repaid with interest over time. 
  • Business loans, lines of credit, credit cards, etc., fall under this category. 
  • Debt financing allows you to retain full ownership and control of your business while repaying the borrowed funds.

Equity Finance 

  • Equity financing involves exchanging partial ownership in your business for capital. 
  • This is typically done by selling shares of your company to investors. 
  • While equity financing does not require repayment, it means sharing profits and decision-making authority with investors.

Wondering which is right for your business? When you outsource bookkeeping services, you get critical business analytics and recommendations at your fingertips. With this valuable information, you can significantly reduce the time required for such vital decision-making.  

What are the most common types of small business financing?

  • Traditional Bank Loans: Banks offer small business loans with fixed interest rates and predefined repayment terms. 

  • Invoice Financing: If your business invoices customers for products or services, invoice financing allows you to borrow against outstanding invoices. This type of financing helps improve cash flow by providing immediate access to funds.

  • Equipment Financing: Equipment financing enables businesses to purchase or lease equipment necessary for operations. The equipment or machinery itself serves as collateral for the loan, making it easier to secure financing.

  • Business Lines of Credit: A business line of credit provides access to a revolving credit line that can be used for various business needs. You only pay interest on the amount you borrow, making it a flexible and convenient option.


Securing the right financing for your small business is crucial for growth and success. By understanding the various types of small business financing, you can make informed decisions that align with your business's needs and financial goals. 

Consult with accounting services for small business when necessary to navigate the complex world of small business financing.

Elevar Accounting
Zupyak is the world’s largest content marketing community, with over 400 000 members and 3 million articles. Explore and get your content discovered.
Read more