Funding—the Basics

Questions about business funding can cause hand wringing and sleepless nights. Fortunately, if you learn some basics about funding types and fully prepare before applying, you can significantly increase your chances of getting what you need.

Financing is in the details

Planning to apply for a loan, line of credit, credit card or almost any type of capital investment, you’ll need to have a good understanding of your business’s financials: profit and loss statements, credit report, and business plan to begin with. It’s easier to advocate for your business when your pitch is backed by hard numbers. 

If it’s still early days, there are options for small businesses that aren’t yet earning revenue or need loans under $250,000. Research nonprofits and alternative funding sources to find the right option for your needs. 
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Types of funding

You can broadly think of funding as falling into two main categories:

Creative funding sources

Creative funding sources

This is a vast and varied world that serves business owners at all stages, but especially those just starting out. Community Development Financial Institutions (CDFIs) and microfinance institutions are designed for businesses that are new and may not have everything a business owner needs for a bank loan, such as a minimum credit score. Creative options also include money from family or friends, venture capital and grants.

Learn more about financial resources for new women entrepreneurs:

Fuel Your Business: Financial Resources for New Entrepreneurs 

Conventional funding sources

Conventional funding sources

Bank and credit union loans and lines of credit are considered conventional options that typically require the longest and strongest track record. Bank loans often have minimum requirements for profitability, credit rating, and length of time in business (usually at least 3 years). In addition they often require collateral, such as property, equipment or expected payments for an upcoming order. That said, banks and credit unions sometimes offer special programs for businesses without the credit history needed for a typical business bank loan.

Interested in learning about business loans and lines offered by Bank of the West?

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Where do Small Business Administration (SBA) loans fit in?

SBA loans are primarily — but not exclusively — offered through banks and credit unions. They’re great in that they tend to have more flexible requirements and lower interest rates than standard bank business loans, but applying for them can take a lot of time. Requirements and loans differ by lender. While Bank of the West is an SBA lender, you can also use the SBA Lender Match referral tool to find a lender to suit your needs.
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Funding for startups and new businesses

Working Solutions is a Community Development Financial Institution that specializes in startup and early-stage financing for Bay Area entrepreneurs. They’re committed to helping local entrepreneurs get the support they need to thrive by providing capital, consulting and community connections.

Connect with Working Solutions

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Start building business credit

Bank of the West offers business credit cards to give new businesses the power to purchase while developing their credit history. Talk with a business banker to find out if a card might be helpful to you.

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Disclaimer

Loans and lines of credit are subject to credit approval. Terms, conditions, fees and other restrictions may apply.