The purpose tells you what the money is for. The product tells you how the agreement works.
Start with the job the money needs to do
“Business funding” means money used to run or grow a business. It can come from savings, investors, borrowing, or other arrangements. Borrowing creates repayment obligations; selling ownership gives someone a stake in the business. Neither is free money.
Write one sentence before comparing products: “I need money for ___, and it will help my business by ___.” A specific purpose makes the amount and repayment plan easier to question.
A quick map of common arrangements
| Type | Plain meaning | Tradeoff to examine |
|---|---|---|
| Term loan | A lump sum repaid over a set period. | You owe payments even if the purchase earns less than expected. |
| Line of credit | Borrow up to a limit as needed, subject to the agreement. | Check draw fees, interest, renewal, and when repayment is due. |
| Invoice factoring | Sell eligible unpaid invoices at a discount. | Fees reduce what you receive; ask who collects and who bears nonpayment risk. |
| Merchant cash advance | Upfront money tied to future business receipts. | Frequent collections and factor pricing can be costly and strain cash flow. |
Background: Federal Reserve overview of small business credit and FTC discussion of financing tradeoffs. These are educational examples, not confirmed Cornerstone offerings.
Equipment: think beyond the purchase price
Equipment financing generally helps pay for eligible equipment; a lease pays for its use under a contract. Ask about ownership, maintenance, insurance, end-of-term payments, and whether the equipment secures the obligation. Collateral is an asset a provider may be able to claim if you default.
A $20,000 machine may also need delivery, installation, and training. A payment that looks manageable can become difficult if the machine sits idle. Compare the complete project cost with conservative expected earnings.
Inventory: consider when stock becomes cash
Stock has to sell before it can repay funding. Estimate how long items may sit, what discounts might be needed, and what happens to unsold goods. An inventory purchase and the financing used to pay for it are separate decisions.
For a seasonal order, map supplier payment dates against realistic customer payment dates. A short repayment schedule may begin before the sales arrive.
Expansion: include the ramp-up period
A new location or a larger team can add rent, deposits, hiring, and setup costs before revenue grows. Compare a smaller pilot, a phased opening, or waiting with funding the whole plan now.
Some businesses also explore SBA-backed loans through participating lenders. A government guarantee protects the lender in specified circumstances; it is not a grant or a promise that you qualify. Your business still owes the loan. See SBA loan information for current program details.
Next, learn how to compare the full cost and whether repayments fit your cash flow.
Sources & further reading
General education, not an offer or individual financial, tax, or legal advice. Educational coverage does not establish provider availability or affiliation.
