Skip to main content
Join Now
Placeholder image for startup capital

< Back to All

The Capital Conundrum: Funding Your Small Business Dreams

June 15, 2024

For enthusiastic entrepreneurs across America, the allure of running your own small business remains magnetic. However, securing sufficient capital is one of the toughest early obstacles. In fact, inadequate capitalization leads directly to high rates of company failures. Clearly, capital matters—but not all funding sources are created equal.

Startling Statistics

The numbers reveal capital constraints as a leading small business killer. Per an eye-opening U.S. Bank study, nearly 50 percent of small company failures tie directly back to cash flow problems or lack of capital. However, Federal Reserve research indicates a mere one percent of smaller firms report zero difficulties in obtaining financing. Just let those shocking statistics sink in. Access to capital remains extremely challenging for non-public companies.

A JPMorgan Chase study found that small businesses were only reaching 50 percent of their revenue goals due to capital shortages. If almost half of your company’s potential gets squandered due to funding gaps, you unquestionably have problems. Clearly, securing financing early allows strategic growth investments down the road.

The (Dangerous) Need for Speed

When payroll is looming, orders are up or equipment crashes unexpectedly, the pressure to get immediate financing relief intensifies. Unfortunately, impatience may steer company owners straight into very precarious capital solutions.

Online business loans and merchant cash advances arguably top the list of “quick money traps” due to hidden financial perils. While fast approvals and next-day funding beckon urgently, these fintech products can feature staggeringly high costs. The average online loan carries imputed interest charges of over 40 percent, while certain merchant cash advance rates exceed 250 percent annually after all fees are considered!

And given their expense structures, payments—often weekly versus the monthly payments of traditional loans—usually cannot adjust if business revenues decline. Companies may then need to lay off employees or close up shop entirely simply to cover relentless payment demands. In short, quick capital comes with extreme risks. Always examine the long-term costs, not just the short-term access.

Exploring Options

Rather than resign your small business vision to undercapitalization, know that palatable financing options do exist! Community banks and credit unions may provide the most flexibility as customer-focused local organizations. Government-supported Small Business Association (SBA) loans also supply both accessibility for borrowers, as well as great long-term value given their capped fees and interest rates.

The unique structure of SBA loans unlocks a variety of appealing advantages for borrowers. Low down payments allow business owners to conserve more capital to dedicate towards growth initiatives. The long repayment terms of 10, 20 or even 25 years also promote greater financial flexibility and cash flow stability versus alternatives like online loans. SBA interest rates tied to government benchmarks avoid market volatility—predictability again aids confident financial planning.

Since the SBA guarantees large portions of approved loans, this reduced risk to lenders facilitates higher approval rates as well, especially for newer firms. For small business owners seeking not just capital injection but also wanting to optimize operational finances for the long haul, exploring SBA lending options with an approved lender makes tremendous strategic sense. The program provides unmatched loan accessibility complemented by exceptional affordability over decades—an invaluable combination to drive growth dreams.

Friends and family constitute options, too, but make sure personal relationships do not turn sour over money matters. Ultimately, check all of your capital-raising boxes before determining approaches. Seeking wise financial counsel from trusted advisors and business mentors can help enormously as well.

With adequate funding, that business concept living inside your head can become a thriving real-world enterprise. Skimp on capital, however, and even the boldest dream gets short-circuited. Do not let access to financing derail your ambitions. Learn about your options and strategically secure the capital and ongoing funding to fully ignite your small business future. Some resources such as Small Business Development Centers ( offer free counseling and consultants to assist you in your search for capital and preparing your business for growth.

Michigan Certified Development Corporation (MCDC) has resources available to assist small businesses with a variety of loan options. Visit to learn more.

By Mark A. Williams, President of Michigan Certified Development Corporation; originally published in SBAM’s May/June 2024 issue of FOCUS magazine

Click here for more News & Resources.

Share On: