Best options to finance a growing SMB? (Line of Credit / Working Capital)

January 09, 2026

by a searcher from INSEAD in New York, NY, USA

I’m looking for advice on the best ways to finance a growing SMB, specifically to increase our working capital / line of credit. I started an aviation business while also running a passive search to acquire a U.S. business (initially I thought acquisition was the best entry into the market). Over time, the operating model proved out and the business has become stable, so I’m now focusing on scaling it rather than continuing the search. Issue: Our growth is constrained by how much credit we can extend to customers (and how quickly we can recycle cash). Current business snapshot: - Revenue: ~$40K/month - EBITDA: ~15–20% - Team: 3 employees - Business age: < 1 year Financing options I’m exploring: - Vendor credit terms - Invoice factoring - Venture debt I’m assuming a traditional bank loan will be difficult given we’re under 1 year old and don’t have a long operating history. My questions: What financing options have worked best for businesses like this (early-stage but stable cash flow)? Any recommendations for providers that understand B2B distribution/working capital dynamics? Are there common pitfalls with factoring facilities in this type of business? What's the typical interest in venture debt in the US? Appreciate any guidance, happy to share more details if helpful.

Reply by a searcher
from Massachusetts Institute of Technology in Apex, NC, USA

Congrats on getting the company off-the-ground. So one key aspect (and took me long time to learn this) is that there are different types of debt and the key to leveraging debt effectively is to match the type of debt to the type of asset/financing you need. If you say, I want to borrow money, the next question is, for what? The other thing to remember is you can "block" yourself based on the debt you take. Lenders greatly prefer to have the 1st position/lien on the company b/c they get paid first. Hard to take other debt, if someone is in the first position (though not impossible, just usually more expensive). Usually, you'll PG a line of credit as banks will underwrite this size business off you personally. Since your growth is constrained by A/R (credit to customers), factoring makes sense BUT this can end up being a forever treadmill, and you're eating a 1-2 percent of profit and you now have a partner who has a "relationship" with your customers. You'll always need more cash to grow. I'd look at it and see if you can structurally change things (credit with your suppliers, shorter terms for customers, COD discount, better A/R collections). You may not, but if you can figure out a way, your growth won't be constrained.

Reply by a lender
from Eastern Illinois University in 900 E Diehl Rd, Naperville, IL 60563, USA

For a newer business like this traditional bank financing is going to be a challenge. I would stay away from MCA lenders. Your best bet is a small factoring line or vendor credit terms. Vendor credit is usually best if you can get it as it usually does not come with much of a cost. But factoring will work if you have A/R you can leverage. Please let me know if you need help. You can reach me here or directly at redacted

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