According to the Federal Reserve’s Small Business Credit Survey, 37% of small employer firms applied for a loan, line of credit, or cash advance during the prior 12 months in 2023. Behind every application sits a business owner weighing risk against opportunity — and often blurring the line between personal and company finances. Many founders, especially early on, tap a personal loan to cover gaps before their business qualifies for dedicated commercial products. But as companies mature, the reasons they seek business financing become more specific and more strategic than most people assume. Here are the triggers that send companies searching for outside capital.
At a Glance: Why Companies Seek Financing
| Reason for Seeking Financing | % of Applicant Businesses |
| Meeting operating expenses / working capital | 59% |
| Business expansion and asset acquisition | 46% |
| Available credit for future use | 41% |
| Repairs or capital asset replacement | 28% |
| Refinancing / debt restructuring | 24% |
Source: Federal Reserve Small Business Credit Survey, 2023
Why Do Companies Need Working Capital Financing?
The short answer: because revenue and expenses rarely move in sync.
A manufacturer invoices a client with net-60 terms while rent and payroll arrive every two weeks. A restaurant chain sees foot traffic drop 40% between January and March but still carries the same fixed overhead. These are not failing businesses — they’re healthy companies caught in the timing mismatch that defines cash flow management.
What the Data Shows
The Federal Reserve’s 2023 data confirms it: 59% of all businesses that sought financing did so specifically to meet operating expenses — making working capital the single most cited reason for pursuing external funding. Roughly 75% of firms reported rising costs of goods, services, and wages as their top financial challenge in 2024. When costs climb faster than receivables, even profitable companies hit liquidity walls. A well-timed working capital infusion doesn’t signal weakness — it signals awareness that cash on hand and cash needed rarely align on the same calendar.
How Does Business Financing Help Companies Grow?
Picture a regional e-commerce brand doing $2 million in annual revenue. Customer demand is climbing, a competitor just exited the market, and the opportunity to expand into two new states is right there — but the bank account holds enough for about six weeks of normal operations.
This is where growth stalls without intervention. The Fed’s data shows 46% of businesses sought capital to expand, pursue new opportunities, or acquire assets. Hiring staff, leasing warehouse space, launching marketing campaigns in unfamiliar markets — each demands upfront spending months before returns materialize.
A small business loan with a 3-to-5-year repayment window or a revolving line of credit gives companies the breathing room to act on momentum rather than watch it pass. If the projected return on a growth initiative exceeds the cost of borrowing, financing that move is not an expense — it’s an investment. Business expansion funded by strategic debt has driven some of the most recognizable brands from local operations to national presence.
What Are the Most Common Assets Companies Finance?
There’s a persistent assumption that responsible businesses buy equipment outright. But that thinking ignores how capital allocation works in practice.
The Equipment Question
Does purchasing a $120,000 CNC machine with cash make a company stronger? On paper, yes — no debt, no interest. But that same $120,000 could cover three months of payroll, fund a product launch, or serve as a safety net for the unexpected. This is exactly why equipment financing exists and why 65% of small term loans under $25,000 go toward equipment purchases, according to FDIC survey data.
Startup Costs That Stack Up Fast
Companies at the startup funding stage face their own version of asset financing. Research from financial technology company Tide found that the average UK startup spends £22,756 in its first year alone, and roughly 56% of newly launched small businesses eventually seek external help. The early expenses include:
- Inventory and raw materials
- Technology infrastructure and software licensing
- Office or warehouse leases and deposits
- Insurance, permits, and legal compliance
- Initial marketing and brand development
Founders often cover early costs from personal savings, but few manage to self-fund all the way to profitability. Startup funding through SBA loans, angel investment, or crowdfunding fills the gap between launch-day ambitions and launch-day bank balances.
Can Debt Restructuring Improve a Company’s Financial Health?
A mid-sized logistics company carries four separate obligations: a term loan at 9.2%, a credit card balance rolling at 22%, an equipment lease with quarterly balloon payments, and a merchant cash advance eating 15% of daily receivables. Each debt made sense individually. Together, they drag monthly cash flow into chaos.
Key stat: 39% of firms now carry more than $100,000 in outstanding debt — a figure that remains elevated above pre-pandemic levels. (Federal Reserve, 2024)
This is the scenario that sends 24% of businesses to seek financing specifically for refinancing or paying down existing debt, per the Fed’s credit survey. Debt restructuring doesn’t mean dodging obligations — the goal is consolidating scattered liabilities into a single, more manageable payment. Lower monthly outflows, reduced interest exposure, and simplified financial planning are the immediate payoffs. For many of these companies, the path forward is reorganizing what they already owe so that existing revenue reaches the bottom line instead of bouncing between five different creditors.
Why Are More Businesses Turning to Alternative Lending?
Traditional banks and small businesses have a trust problem — and the numbers prove it.
| Lender Type | Full Approval Rate |
| Large banks | 14.6% |
| Small banks | ~52% |
| Credit unions | ~51% |
| Alternative lenders | Higher approval, faster funding |
Source: Federal Reserve Small Business Credit Survey; Goldman Sachs
Goldman Sachs data from January 2024 found that 53% of small business owners said they couldn’t afford to take out a loan due to interest rates — while 44% didn’t even bother applying because they expected denial.
Alternative lending has stepped into this gap with speed as its primary selling point. Where a traditional SBA loan takes 30 to 90 days from application to funding, many online lenders deliver decisions within hours and capital within days. The tradeoff is cost — rates from alternative lending platforms typically run higher. But for a business that needs $50,000 next week to fulfill a major purchase order, waiting three months is not a real option. The global digital lending market reflects this shift, with projections reaching $20.5 billion by 2026.
The Quiet Math Behind Every Funding Decision
Companies don’t seek business financing because they failed at something. They seek it because standing still costs more than borrowing. The triggers differ — working capital gaps, growth windows, equipment needs, debt tangles, or bank rejections — but the underlying calculation stays the same. Smart capital, deployed at the right moment, pays for itself.