How to Fund Your Business Without Dipping Into Savings

As a business owner, you pour time, energy and creativity into your work each day to make customers happy and provide jobs for your staff. What happens when you’re running short on money to pour into your business?

Cash flow problems happen to every business from time to time. One solution is to dip into your savings account to make it to the next quarter. That option, however, could deplete your reserves too quickly and prevent you from having emergency funds for the future.

There are other ways to fund your business, some which require applications or other qualifications. Take a look and see if these funding sources could help move your business forward.

Small Business Grants

One option to fund your company is a local or federal small business grant. They are low risk but come with a list of qualifications. Your business may be required to spend grant funds on certain budget items, but you won’t have to pay the money back unless you violate the terms of the grant.

How to land a grant

“Free” money is always competitive. To boost your chances of receiving a grant, there are some things you can do.
 

• Outline your need – clearly state why you need a grant, including why your business is vital to the marketplace
• Follow the rules – show your spending plan and demonstrate how you will spend the funds as required
• Follow through – provide documentation on how your business followed the grant rules; this will show you’re a responsible recipient if you reapply for more funding

Types of grants

Your business could be eligible for grant funding reserved for certain types of entrepreneurs. Various foundations, large companies and government agencies set aside dollars to support a diverse marketplace. Do you fit any of the following categories?
 

• Minority-owned business
• Female-owned business
• Veteran-owned business

Large corporations including Verizon and Visa also offer grants to small businesses. The U.S. Chamber of Commerce has more information on special interest business grants and other funding opportunities.

Small business loans

Your business may need funding quicker than a grant application process can offer. Finding a small business lender is another option. Keep in mind that your budget must account for monthly interest on the loan.

You’ll still need to do your homework when applying for a loan. Lenders will carefully consider the overall financial health of your business.

Make sure your documentation is all in order. Provide accounting for your current cash flow and how the loan funding will be spent. Most importantly, lay out a plan for how you plan to pay back the loan in the time given.

Types of business loans

 

• 7(a) loans – offered through the Small Business Administration, this popular loan is typically for refinancing existing debt, purchasing real estate or buying equipment
• 504 loans – designed for businesses that need long-term financing to expand their company and create new jobs
• Microloans – designed for companies wanting a smaller amount of cash to purchase inventory, make repairs or other short-term needs

SouthState Small Business Banking offers specialized loans including:
 

• Equipment Loans
• Automobile and Fleet Financing
• Construction Loans

Line of credit

Businesses with seasonal buying needs or fluctuating cash flow may benefit from a line of credit. Instead of a one-time infusion of cash from a grant or loan, a line of credit allows a business to borrow funds as needed, pay the money back and then borrow again.

Similar to a credit card, a small business line of credit is a revolving loan. There will be a minimum payment with the option to pay more to avoid interest charges.

A line of credit can boost your business credit if used responsibly, and there are other benefits to consider. SouthState offers a business line of credit for businesses in operation for at least 18 months.

Need funds sooner or to build credit history as a newer business? SouthState offers business credit cards for companies of any size.

Funds from an investor

Another way of obtaining capital is through an investor who’s looking to work with small businesses.

While the Small Business Administration doesn’t invest directly in companies, they do work with Small Business Investment Companies, or SBICs, to support businesses.

SBICs funnel money into a business in 3 typical ways:
 

• Equity – an SBIC offers funding in exchange for a share of ownership
• Debt – a loan the company must pay back
• Debt with equity – a combination of a loan plus ownership shares

Funding works best for established businesses who can pay off any loans and interest. SBICs also target businesses with the majority of employees and assets in the United States.

Disaster assistance

Any thriving business can fall on difficult times due to a natural disaster or other major loss. Fortunately, there are programs designed to get companies back on their feet.

The most common funding source is a low-interest disaster loan from the Small Business Administration. Options include:
 

• Physical damage loan – repairs and replacement following a declared disaster
• Economic injury loan – operating expenses following a declared disaster
• Mitigation loan – improvements to eliminate future damage
• Military reservist loan – operating expenses to make up for employees on active duty leave

For more information on SBICs or applying for a disaster loan, visit the Small Business Administration website.

Need help deciding which funding source is best for your business? Talk to one of SouthState’s qualified small business bankers.