Tips to Finance Starting a Marketing Agency: A Complete Guide

Why Agency Owners May Need Financing

Starting a marketing agency is appealing because, on the surface, you may not have as many upfront business costs.

While you may not have as many expenses as someone starting a restaurant, you still need capital to cover essential costs for your business.

Website

When potential clients are looking you up, you need an eye-catching website that keeps people’s attention. You may need to hire a branding expert and someone to design your website to boost your online presence.

That’s for the potential clients who find you. But to have your website found in the first place, you might need to invest in search engine optimization (SEO).

Digital Tools

After starting a marketing agency, you’ll need to stay organized and manage your client relationships efficiently. That often means investing in digital tools such as:

• Project management software: To stay on task, automate workflows, collaborate, and delegate, consider project management tools like Asana, Trello, or Monday.com.

• Social media management tools: Agencies use social media marketing tools like Buffer, Sprout Social, or Hootsuite to manage and schedule content across client accounts, track specific metrics, and manage various accounts.

• Content marketing tools: Content creation is a major part of what you do. As a result, you might need tools like Grammarly to check spelling and grammar, Canva for design, SEMrush for researching keywords and SEO insights.

Hiring Support

You might need to hire specific team members or freelancers to help you in certain areas. For example, email marketing, influencer marketing, ecommerce sales, or paid ads on Google or Facebook. Though you have the know how for many things, you might not be an expert in everything.

Marketing and Sales

Getting new business isn’t just a pricing issue. You have to focus on your own marketing and sales. Of course, you do that for your clients, but you must do it for your own company when starting a marketing agency.

Come up with a solid marketing strategy catering to your target audience. Have case studies available with visuals, testimonials, and statistics that highlight and sell your work.

How to Finance Starting a Marketing Agency

If you’re starting a marketing agency, here are some financing options to consider.

1. Personal Savings

Before taking on any loans, review your personal savings. If you can comfortably afford it (and have additional savings left), investing in your business can be a smart move. You can limit or avoid borrowing altogether while you get your marketing agency off the ground and secure new clients.

2. Small Business Loans

If you don’t have the financial resources to invest in your business, small business loans can be another option. However, qualifying may be difficult. Lenders generally review your annual revenue, credit history, and time in business. If you don’t have much of a track record or revenue coming in, lenders may not want to take the risk.

That doesn’t mean it’s impossible, though. Some lenders may review alternative data or have less stringent eligibility requirements.

Small business loans are often structured as term loans. Borrowers receive capital in the form of a lump sum and repay the funds over a particular term, typically several years or longer. Term loans can be good for large expenses and provide borrowers with predictability.

3. Business Lines of Credit

Starting a marketing agency can mean unexpected expenses at unexpected times.  Business lines of credit can be useful in situations like this, where you need access to capital on an ongoing basis.

When you get a loan,  if qualified, generally receive the funds and that’s it. If you need more capital later, you’ll need to apply for another loan. Through a business line of credit, lenders offer borrowers a specific credit limit.

Based on that, borrowers can tap funds as they please and only pay the interest on the amount drawn. This is a type of revolving credit, like a credit card, where your available credit replenishes as you repay what you owe. Business lines of credit can offer more flexibility and help you manage cash flow while you kickstart your agency.

Just be aware that business lines of credit typically have a different repayment structure. Generally, you’ll have minimum payments as a small percentage of your outstanding balance.

The draw period, or the time during which you can tap the available funds, is for a set period of time. Then, you must repay the remaining balance. With this type of financing, there may also be annual or maintenance fees.

4. Software Financing

Starting a marketing agency means having the right digital tools. While you may not need a brick-and-mortar location or tons of equipment like a restaurant, you need the appropriate software to run your business.

For example, you need a CRM (Customer Relationship Management) to track leads, marketing activity, and sales, or a project management system like Asana to track projects.

Software financing can help you invest in these tools upfront and break down costs over time.

5. SBA Microloans

The U.S. Small Business Administration (SBA) empowers small business owners by providing tools, resources, and even loan options. Their popular program is the SBA 7(a) loan. But if you’re starting a marketing agency and have limited revenue and operating history, the SBA’s microloan program may be a better option.

The SBA provides microloans to eligible entrepreneurs for up to $50,000. Though it should be noted that the average amount is $13,000. The SBA partners with lenders that are non-profit community-based organizations to distribute funds to qualified applicants.

6. Business Credit Cards

When you’re starting a marketing agency and establishing yourself as a business owner, it’s essential to build business credit. As a new agency owner, you may not qualify for all of the financing options available.

Business credit cards can be a solution for short-term expenses and help you establish a business credit profile. Used strategically, business credit cards can be a useful tool.
However, interest rates are typically high. So, if you need to carry a balance, interest charges can accumulate fast.

Tips to Qualify for Financing as a New Agency Owner

While various financing options are available as a new agency owner, you need to qualify first. Each lender has unique underwriting criteria and eligibility requirements.

There are some things that you can do to improve your application and chances of approval.

• Create a business plan: Having a formal business plan can help you get clarity while providing more confidence to lenders. The SBA has a useful resource on how to write your business plan.

• Boost your credit score: Without an established business credit score, lenders will rely heavily on your personal credit score. According to FICO, your payment history makes up 35% of your credit score, while amounts owed make up 30%. To help your credit, always make your monthly payments on time and keep outstanding balances low relative to your credit limits.

• Register business: Create a legal business entity with your state. For example, a Limited Liability Company (LLC).

• Get an EIN: Apply for an employer identification number (EIN), which is a taxpayer ID for businesses. You can apply online using the official IRS page.

• Separate finances: If you’re just starting a marketing agency, you may only have a personal checking and savings account. It’s a smart move to open a business checking and savings account. Not only is it good for accounting purposes, but it can also help lenders take you more seriously.

• Prepare projections: Before applying for financing, prepare revenue projections.

• Collect documents: Gather any business licenses, permits, tax returns, and bank statements to streamline and improve the application process.

Final Thoughts

Launching a marketing agency and going all in on your dream can feel exciting. But it often means working more than typical full-time hours and can mean upfront sacrifices and expenses.

Financing options can help by supporting your growth, preserving your cash flow, and establishing business credit. You want the space to put all of your energy into your client work and execute high-quality marketing campaigns and attract potential clients. With the right type of financing, you can build up your roster and focus on sustainability, while positioning your agency for long-term success.