Whether your business is newly launched or has been thriving for many years, you might find yourself in need of financing to support growth or sustain operations. For example, your established healthcare practice might be looking to invest in the latest AI-powered diagnostic equipment, or your store might need to expand its inventory to meet a surge in online orders. Maybe your company is looking to introduce new products or services, or refine existing offerings. In any case, these goals could be within your grasp—if you can get the right financing.
Securing Financing Can Be Difficult
Entrepreneurs often need to get creative in order to access the capital they need to grow their business. Typical financing options include: personal or business credit cards, borrowing against securities portfolios, and taking out commercial loans. Each of these options carries pros and cons, some of which we discuss below:
Tapping unsecured credit, such as credit cards
Credit cards are commonly used by many small businesses. In fact, the J.D. Power 2025 U.S. Small Business Credit Card Satisfaction Study found that 89% of businesses use credit cards for business purchases.1
Pros:
- Once approved for the card, most purchases can be made quickly without any paperwork
- Opening a credit card can help establish a credit record for your business, making it easier to obtain financing in the future.
Cons:
- The main downside is cost. Although business credit cards tend to charge lower rates than consumer cards, the interest rate can still be in the double digits2.
Take out a commercial loan
A business loan or line of credit from a bank, credit union or online funder is another common way to secure financing.
Pros:
- A commercial loan is familiar to entrepreneurs and may be widely available.
- Usually carries lower interest rates than some other financing options, such as credit cards. The interest payments may be tax deductible.
- Taking a commercial loan can help establish a credit record for your business, making it easier to obtain financing in the future.
Cons:
- Paperwork for a bank loan can be burdensome, especially for a smaller business. You may have to provide regular reports to the lender on specific items such as on receivables or even the creditworthiness of customers.
- You may also have to prove that the business—or the business owners—have adequate collateral, which may involve getting appraisals for company real estate, equipment or inventory.
Borrow against your portfolio
A securities based loan, or SBL, uses eligible securities in a brokerage account as collateral for a loan or line of credit.
Pros:
- If you qualify for a SBL, you may potentially benefit from lower costs compared to other borrowing options.
- Credit decisions may be approved within just a few days with relatively little paperwork, which can be beneficial when a business needs a quick response.
- Another advantage if you own a newer business is that you often don’t need inventory to obtain an SBL since they are secured by a stock portfolio.
Cons:
- There are risks associated with a securities-based loan, including the potential for having to replenish your collateral or repay your loan if the value of the securities pledged as collateral drops.
Navigating the complexities of securing capital for business purchases can be challenging. Consulting with a financial professional, such as a financial advisor, can help business owners evaluate the pros and cons before applying for a loan and make informed decisions that align with their financial goals.
