Overcoming Funding Challenges in the Small Business Landscape

You don’t want to run out of money.

That is the worst case scenario for all business owners. You have a great product, awesome customers and big dreams. But there’s one little thing that’s holding you back…

Money.

Fact. A shocking 82% of businesses fail due to cash flow problems. It looks like a typo. But eight out of 10 businesses close because they can’t get funding to stay open.

The truth is…

Traditional sources of funding are more difficult than ever to access. Banks have become much more selective. And alternative lenders charge rates that make your head spin.

What you’ll discover

• Why Traditional Funding is Broken for Today’s Businesses
• The True Cost of Funding Problems on Business Growth
• Smart Alternative Funding Solutions That Work
• How to Position Your Business for Funding Approval

Why Traditional Funding is Broken for Today’s Businesses

Do you want to know something that might shock you?

Less than 15% of small business loans are approved by traditional banks. Only 14.6% to be exact. Imagine that. Just over 1 out of 10 small business owners get approved by major lenders.

And it gets worse.

Upwards of 44% of small businesses actually don’t even bother applying for a loan. They think they won’t get approved. That’s 44% of small business owners that throw up their hands in defeat before they even try.

It’s like the traditional system wasn’t even designed for today’s fast-paced business environment. Banks want stellar credit scores, three years of financial history and collateral that many small businesses owners don’t have.

Here’s what’s going on…

Small businesses live in a world of unpredictable cash flow, mounting expenses, and opportunities that require immediate action. But banks still operate like it’s 1995 with long approval processes and rigid requirements.

The result?

Too many businesses that have the potential to grow and contribute to the economy with the right financial support are left to struggle to stay afloat, or they close their doors for good.

That is precisely why forward-thinking business owners are pursuing alternative options. Instead of waiting months for bank approval, business owners are increasingly turning to flexible solutions like a small business line of credit to access working capital when they need it and avoid traditional lending headaches.

The True Cost of Funding Problems on Business Growth

Let’s paint a real picture of what funding problems actually cost…

According to the Federal Reserve’s 2024 Small Business Credit Survey, 75% of small businesses are experiencing rising costs of goods, services, and wages. Over half are struggling to pay basic operating expenses.

This creates a vicious cycle:

Higher costs cut into profits, making it harder for businesses to qualify for traditional loans. Without access to capital, businesses can’t invest in growth opportunities, upgrade equipment, or build cash reserves to weather tough times.

The statistics don’t lie. 56% of small businesses say paying basic operating expenses is a major challenge, while 51% are fighting to manage uneven cash flow.

And here’s the kicker…

Credit cards have become a go-to source of funding in a pinch. 59% of small businesses are turning to credit cards for emergency funding when they need working capital, with more than half maxing out over 50% of their available credit limit.

This is not sustainable growth financing. It’s a desperate survival mode move.

Smart Alternative Funding Solutions That Work

Ok, on to the good news.

The funding landscape is changing. Savvy business owners are finding new sources of capital. Alternative lenders are stepping up to fill a void that traditional banks created.

Revenue Based Financing: The Growth-Friendly Alternative

Traditional bank loans require fixed monthly repayments whether your business is doing well or not. This can be a death knell when cash flow is tight. Enter revenue-based financing. Instead of fixed payments, you pay a percentage of monthly revenue.

Pros:

• Payments go down when business is slow and up when business is good
• No collateral needed
• No fixed monthly payments
• Funding decision in 1-2 weeks

Business owners can use revenue-based financing for seasonal businesses, recurring revenue businesses, or any business with growth potential that is limited by a lack of collateral.

Business Lines of Credit: Your Financial Safety Net

A business line of credit is like a safety net. You have access to funds when you need them, but you aren’t pushed to make payments you can’t afford. Pay interest only on what you draw down and use lines of credit to manage cash flow gaps, make big purchases, and take advantage of unexpected opportunities.

Why business lines of credit work:

• Access to flexible funds
• Cheaper than credit cards
• Builds business credit history
• Access funds for growth or working capital

Equipment Financing: Fuel Growth Without Dipping Into Cash

Want to grow but need new equipment? Equipment financing lets you get the gear your business needs without draining your cash reserves. The equipment you purchase is used as collateral, making it much easier to qualify for than a traditional bank loan.

Invoice Factoring: Unlock Receivables into Immediate Cash Flow

Invoice factoring turns your outstanding invoices into cash in your bank account. Instead of waiting 30-90 days for payment, you get up to 90% of value immediately. Invoice factoring is great for businesses that offer payment terms to customers.

How to Position Your Business for Funding Success

Ok, getting approved for business funding isn’t just a matter of having good credit. It’s about positioning your business so that a lender sees it as a smart investment opportunity.

Build a Compelling Business Story

Lenders will want to see your numbers but also understand your vision. Take the time to craft a clear story that explains your business and includes:

• The problem you solve
• Your revenue streams
• Your growth strategy
• How the loan would accelerate success

Get Your Financial House in Order

Do not apply for business funding until you have the following in order:

• Clean financials
• Accurate cash flow projections
• A realistic budget of what the money will be used for
• Any collateral or evidence of revenue stream

The average SBA loan reached $446,975 in 2023, a 10% increase from the prior year. Yet smaller banks approved 82% of applications compared to 68% approval for large banks. Preparation and lender choice matter.

Apply at the Right Time

The worst time to apply for funding is when you need money right now. Lenders can smell desperation a mile away. The ideal time to secure funding is when your business is performing well and you have a clear plan for using the money.

Diversify Funding Sources

Don’t put all your funding needs in one basket. Successful business owners use a variety of sources for different purposes:

• Business lines of credit for working capital
• Equipment financing for major purchases
• Revenue-based financing for growth
• Invoice factoring for cash flow

The Future of Small Business Funding

The small business funding landscape is changing rapidly. Digital lenders are using technology to assess risk and make faster, more accurate lending decisions. The digital lending market will double to $20.5 billion by 2026.

Meaning:

• Faster approvals
• More flexible underwriting criteria
• Better rates and terms for qualified borrowers
• Greater access to working capital for small businesses

The challenge is that with new opportunity comes great responsibility. Getting approved is just the first step, it’s using capital in a way that builds sustainable growth that matters most.

Making it Happen

Small business funding problems are real, but they’re not impossible to overcome. The difference between struggling and thriving businesses is an understanding of their options, preparation, and choosing funding solutions that fit their growth strategy.

Remember:

• Traditional bank loan approval rates are less than 15% of applications
• 75% of small businesses are fighting to pay for rising costs and need help
• Alternative funding options are more accessible than ever before
• Success comes from finding the right solution that matches your needs

The game has changed and now there is opportunity for business owners that know where to look. Don’t let cash flow problems hold back your business growth, take action now and explore the funding solutions that can help fuel your success.