A Practical Guide to Understanding Financing Paths
Funding is one of the biggest barriers new business owners face. Whether you're launching a boutique in Covington, opening a food truck in Cincinnati, or starting a home-based service in Florence, the right funding option can determine how quickly, and confidently, you can open your doors.
This chapter outlines the three most common, realistic funding options for new businesses in Kentucky and Ohio and explains how each one works, and when it’s most useful.
1. SBA Loans: A Strong Option for New Businesses
The U.S. Small Business Administration (SBA) offers government-backed loans designed to support small businesses that may not yet qualify for traditional financing. These loans are issued through approved lenders, like Heritage Bank, but are partially guaranteed by the SBA.
Why SBA Loans Matter for Startups
- Lower down payment requirements
- Longer repayment terms
- Flexible use cases (equipment, working capital, startup costs)
- Designed to support businesses without established credit or financial history
When SBA Loans Are a Good Fit
- You need funding to launch or expand within your first few years
- Your business needs equipment, inventory, or working capital
- You don’t yet qualify for traditional financing
- You're purchasing or starting a franchise
Example
A new Cincinnati-based commercial cleaning company may use an SBA loan through Heritage Bank to purchase equipment, initial supplies, and a vehicle—helping them launch with the resources needed to secure contracts.
Pros
- Accessible to new businesses
- Longer repayment terms
- Lower equity requirements
Find out if SBA loans are right for you and your business by reading more in our blog: https://blog.ourheritage.bank/what-is-a-sba-preferred-lender.
2. Traditional Business Loans & Lines of Credit
Not every business needs or benefits from an SBA-backed loan. Many new businesses qualify for traditional financing, especially if they have a strong business plan, collateral, or owner experience.
These include:
- Term loans (borrowing a set amount with fixed repayment)
- Lines of credit (borrowing as needed, ideal for cash flow)
How These Work for New Businesses
Heritage Bank reviews the business plan, financial assumptions, industry, and owner experience. Even new businesses with limited history may qualify if they show strong financial planning.
When Term Loans Are Useful
- Buying equipment
- Funding renovations or build-outs
- Starting inventory
- Purchasing a vehicle
When Lines of Credit Are Useful
- Managing seasonal cash flow
- Covering timing gaps in payables vs receivables
- Addressing unexpected expenses
- Supporting early-stage growth
Example
A startup bakery in Covington may use a Heritage Bank line of credit to manage ingredient purchases during slower months, ensuring cash flow stays steady year-round.
Pros
- Fast decision-making
- Multiple options
- Can complement SBA financing
3. Business Credit Cards
Business credit cards help new businesses track expenses, separate personal and business spending, and begin building business credit from day one.
Why Business Credit Cards Matter
- Establish business credit history
- Easy to track categories (supplies, fuel, software, etc.)
- Helpful for recurring monthly expenses
- Often easier to qualify for than loans
When to Use Them
- Covering early purchases like marketing, supplies, or software
- Managing variable expenses
- Building creditworthiness for future lending
Example
A freelance designer in Cincinnati may use a business credit card from Heritage Bank to pay for Adobe Creative Cloud, a domain name, and initial marketing, while keeping all business transactions separate and trackable.
Pros
- Builds business credit
- Only use what you need
- Good for recurring expenses
How to Choose the Right Funding Option
When evaluating funding paths, new business owners should consider:
A. What the funding will be used for
Equipment, working capital, inventory, build-out, etc.
B. How quickly funds are needed
Credit cards and vendor credit move quickly; SBA loans take longer.
C. Your long-term goals
Some funding types are meant to support early stages, while others work best for growth and expansion.
D. Your personal and business financial situation
Strength of business plan, collateral, credit, and cash flow projections.
E. What builds the strongest long-term relationship with your bank
Consistency matters, especially for future financing.
What Banks Looks for in New Business Financing
While every business is unique, many successful new businesses share these characteristics:
- A clear business plan
- Realistic financial projections
- Strong understanding of startup costs
- Evidence of early cash flow planning
- Responsible management of personal finances
- A commitment to establishing business credit
Choosing the right funding option can shape your business’s success from day one. Whether you need working capital, equipment financing, or long-term support as you grow, the best solution is the one aligned with your goals and financial strategy.
If you're ready to explore your options, Heritage Bank’s business banking team is here to help. Reach out to a commercial lender today and find the financing path that fits your business.
