As someone who has been involved in seven start-up businesses, I understand the challenges associated with finding business funding. Since co-founding Kabbage Inc. more than six years ago, I’ve been fortunate to play a role in supporting tens of thousands of entrepreneurs working to sustain and grow their businesses. Traditionally, this population has been underserved by an existing lending process that is too slow, manual and risk-averse to invest in small businesses.

Small business owners are increasingly seeking reliable sources of funding that match their fast pace and are willing to extend capital to newer ventures that exhibit great potential.

If you are a small business in need of extra capital to take the next step in your business trajectory, here are a few key considerations to keep in mind as you research funding options.

Review Your Business Finances

Before pursuing any financial options, thoroughly review your records to ensure your business is best-positioned for loan approval. Most lenders will require documentation that a history of strong performance and has a high likelihood of repayment.

Bookkeeping tools like Xero, Sage & QuickBooks can help you document your income and expenses, providing a detailed review of your business performance.

It’s crucial to separate your personal and business finances to easily illustrate the financial strength of your business. If you have not already done so, open a bank account and credit card under your business’s name.

Be Cautious before Borrowing from Family and Friends

In the early stages of a business, many entrepreneurs self-fund their ventures through personal savings or credit cards or by accepting capital from family and friends.

  • Advantages: When looking for business capital, those who know you best are most likely to recognize your talent and passion and support you as you pursue your vision.
  • Drawbacks: Relying on family and friends gives you a limited pool of funding. Blending business and personal connections requires a delicate balance, given the risks for everyone involved.

Takeaway: While there can be upsides to sharing successes with your friends and family, the risks often outweigh the short-term financial benefits.

Use Credit Cards Sparingly

Because they provide quick funding and point-of-sale access for a variety of business needs, credit cards are a popular way for entrepreneurs to fund immediate business expenses.

  • Advantages: Credit cards are easy to access anywhere for any business expense.
  • Drawbacks: For many business owners, credit lines are too low to make a significant impact on your goals. Further, consumers who utilize more than 50% of their credit lines will see their credit scores drop, which lowers not only the cost of personal borrowing but makes borrowing from a bank or other lender more costly.

Takeaway: Credit cards are a reliable cash management tool and can be advantageous during early growth stages, but they can limit large and long-term growth plans.

Don’t rely only on a bank loan

In the past, the only option for small business funding required small business owners to visit a bank, which demanded  extensive paperwork and significant time investments.

  • Advantages: If you can get a small business loan from a bank, you’ll typically pay lower interest than most other options.
  • Drawbacks: Banks make their greatest margins by lending larger sums than most small businesses seek. As a result, entrepreneurs often do not feel like a priority for many big banks. Banks’ extended review timelines and documentation requirements, which lead to a decline more than half the time, do not work for small businesses that need to invest that time in their businesses.

Takeaway: If your business is newer and does not have an established track record of strong performance, you may want to look outside of traditional bank loans for small business funding.

Consider online lenders

With the rise of entrepreneurs searching for funding that fits the modern age, new, technology-enabled lenders have emerged, offering greater flexibility and speed than many traditional funding methods.

  • Advantages: Tech-enabled lenders won’t require you to compile endless financial records or wait weeks for a decision. Apply online, and you’ll have a decision based on your latest business data, with access to capital in minutes, not weeks.
  • Drawbacks: Some online loans carry higher interest rates than traditional bank loans.

Takeaway: If your business is not eligible for a traditional loan, innovative companies like Kabbage are making it possible for small businesses to access the funding they need to keep growing.