Looking for Small Business Funding? Be Ready to Manage Your Funds First

It is a well-worn phrase that small businesses are the backbone of the economy. Small businesses create jobs, stimulate innovation, and serve as catalysts for community and economic development. And yet, conversations around their struggles often echo the same refrain: “There is lack of funding.”

That narrative, while partially true, is increasingly one-sided. What we rarely ask is: are small businesses truly ready to access the funding that is already available? Or more precisely, is the challenge really the absence of funding or the inability to access and manage it effectively?

Looks like it’s time we flipped the coin.

The Illusion of Small Business Funding Scarcity

Plenty of funding opportunities do exist. There are microloans from development banks. Equity investments from angel networks. Grants from foundations. Credit lines from fintech platforms. Our options have grown significantly. Yet, many small businesses still struggle to get in the door. This is where we must distinguish availability from accessibility.

While significant funding is available to support entrepreneurs, many business owners are still not equipped to meet application documentation requirements, provide accurate financial records, articulate clear growth plans or present fundable business models. In other words, funding is available, but not accessible—and that inaccessibility is often a function of internal capacity, not just external barriers.

The Overplayed Side of the Coin: External Barriers to Funding

Of course, we must acknowledge the legitimate systemic hurdles:

• Cumbersome loan processes that intimidate or confuse business owners.
• High collateral requirements that exclude startups and microenterprises.
• Limited awareness of available funding options, especially outside urban centers.
• Biases and inefficiencies in financial institutions and grant-making bodies.

These barriers are real. But when we focus only on these, we may unintentionally tell small business owners: “It’s all out of your control.” And while well-meaning, this narrative can become disempowering.

The Overlooked Side of the Coin: Internal Readiness for Funding

On the flip side lies what is less often discussed but equally important: many small business owners are not fund ready. In other words, they are not ready to absorb and use funds efficiently.

• They operate without financial statements or cash flow forecasts.
• They lack a basic understanding of credit terms, repayment schedules, or interest implications.
• They have no strategic plan for how to use funds productively—or worse, they treat grants and loans like windfalls rather than business instruments.
• They are unaccustomed to formal accountability, governance, or reporting.

These are not necessarily character flaws; they are capacity gaps. And these are signs that more support is needed before and after the money hits their account. If we are honest, throwing money at an unprepared business doesn’t solve its problems; it often magnifies them.

Consider two entrepreneurs:

• Entrepreneur A receives a $10,000 grant to scale an agro-processing venture. But without a growth strategy or plans to use the funds efficiently, the money is spent on shiny but unnecessary equipment and haphazard expansion. Within a year, the business is worse off—overextended, disorganized, and more stressed than before.
• Entrepreneur B, denied funding, focuses on strengthening operations by streamlining processes, building a customer base, and improving recordkeeping. A year later, the business is fund ready and able to secure an investment on better terms.

This contrast underscores a hard truth that funding is a catalyst and not a cure. It amplifies what already exists. And without internal structure, discipline, and foresight, capital can do more harm than good.

Entrepreneurs Should Be Ready to Manage Funding

The conversation about small business challenges needs a reset. We must stop positioning lack of/access to capital as the only or ultimate barrier to growth. It is part of the puzzle—but so is the ability to use capital effectively. The reality is nuanced:

• Yes, external systems need reform.
• Yes, more inclusive capital must be mobilized.
• But yes—entrepreneurs also need to be prepared to manage that capital.

This is not about placing blame. It is about everyone working together and doing their part, learning to take responsibility. We must invest in both access and “absorption.” This is a dual investment strategy that:

• Improves external support such as simplified funding processes, inclusive eligibility criteria, and contextualized advisory services.
• Strengthens internal capacity such as financial literacy, operational discipline, strategic planning, and governance.

Funders, policymakers, and development organizations should invest just as heavily in readiness-building as they do in disbursing capital. Some institutions are already modeling a better way.

Community Development Financial Institutions (CDFIs) have long understood that capital alone isn’t enough. Many CDFIs have evolved their approach—having loan officers wear two hats, serving as a loan officer and a business mentor. Beyond loan “production,” they help entrepreneurs with business planning, credit education, financial forecasting, and even post-loan support. This blended approach (capital plus capacity) has made CDFIs especially effective in underserved communities. They recognize that readiness is not a given, but a process that can be developed with the right tools and guidance.

Recently, I have seen small business owners also rising to the challenge. More and more entrepreneurs are starting to see that getting ready for funding is just as important as finding where to get it. They are signing up for training, asking for advice from people with experience, keeping better records, and making clearer plans for how to grow their business. Whether they are doing these to check boxes on a loan/grant application form or not, I think it is encouraging. Entrepreneurs need to feel just as confident asking, “Am I ready to be funded?” as they are in asking, “Who will fund me?”

Responsible Funding Management Leads to Sustainable Growth

So, the next time you hear someone say, “small businesses can’t access funding,” pause and ask: is the funding truly unavailable, or is it simply out of reach due to internal limitations?

Sustainable business growth requires more than funding. It requires readiness and responsibility. And until we start addressing both sides of the coin, we’ll continue mistaking availability for access, and challenges for excuses.