By Cheryl Thompson, vice president and business banking manager with Arvest Bank – Greater Kansas City
Building and running a successful business requires capital, and many business owners rely on financing to buy equipment and inventory, pay employees, navigate unexpected challenges and seize opportunities for long-term growth.
According to the Federal Reserve 2024 Small Business Credit Survey, small business loan demand rose last year, as interest rates on new term loans and lines of credit eased. If interest rates drop further, more small businesses may pursue financing options.
Here are some of the financing options available to small business owners or entrepreneurs eager to start a new venture.
Traditional bank lending
Loans from both large and small banks are common financing sources for small businesses. Conventional loans and lines of credit can offer flexible terms and competitive interest rates based on the owner’s financial health and the business’s revenue, and often favor those with established revenue streams and strong personal credit. Arvest Bank, through its subsidiary Arvest Opportunity Fund, offers alternative lending options for customers who may not meet traditional lending requirements. Regardless of your current financial situation, establishing a relationship with a business loan advisor and exploring various funding options is a constructive first step.
Small Business Administration-backed lending
Small Business Administration (SBA) loans are partially guaranteed by the government and issued by participating lenders. They are particularly beneficial for business owners with solid plans but limited collateral or shorter credit histories. They also typically feature lower down payments, longer repayment terms and competitive interest rates compared to traditional financing. The most popular SBA options include 7(a) loans for general business purposes and 504 loans for major fixed assets like equipment or real estate. SBA Preferred Lenders, like Arvest Bank, can make the loan process even easier because they’ve been granted authority by the SBA to make final loan approval decisions themselves.
Online lenders and finance companies
In recent years, online lenders and many fintech companies have emerged as alternative financing options, providing loans, lines of credit and credit cards. While the appeal of online lending often lies in its speed and convenience, the Small Business Credit Survey revealed that applicants at online lenders were more likely to face higher interest rates and less favorable payment terms compared to those at traditional institutions.
Other types of funding
Self-funding, grants or loans from family and friends tend to be favored by new businesses as they allow them to avoid incurring significant debt and associated interest payments that could strain early-stage cash flow. Self-funding typically involves leveraging personal or retirement savings to launch or grow the business. While this route provides complete control over the business, it also means assuming all associated risks. Additionally, accessing retirement savings may incur fees or penalties, possibly jeopardizing retirement goals.
Whether you are an aspiring entrepreneur or an established business owner looking to expand, evaluating your financing options and consulting with a loan advisor can help you identify the best solutions to achieve your goals. To learn more about financing options through Arvest Bank and to apply online, visit arvest.com/businessloans.
Cheryl Thompson is vice president and business banking manager at Arvest Bank – Greater Kansas City. She can be reached at cthompson4@arvest.com.
With more than $27 billion in assets, Arvest is a full-service bank that delivers financial solutions to individuals and businesses of all sizes. Since entering the Kansas City market in 2009, Arvest has grown to a top 20 bank and the sixth largest mortgage lender in the metro. The bank has 20 locations in the metro area, including eight in Johnson County. Arvest is an Equal Housing Lender and Member FDIC.
