Where to find money to start your business

14 min read
founder getting funding

Executive Summary

Business funding in the initial stages of your startup doesn’t have to come directly from banks or other financial institutions. Keep an open mind and consider all your funding streams.

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Many talented people dream of leaving the workforce to start their own entrepreneurial ventures. However, funding a business can present a major hurdle, and it can be intimidating to take the first step when things are uncertain. 

Luckily, in today’s landscape there are many options for funding, even for brand new businesses. With a little creativity, you can combine a couple (or a few) of these funding sources to get started on your dream business.

Read on to learn about the pros and cons of:



If you are first starting out, chances are you aren't too keen on taking up debt on your balance sheet from day one. Here’s where a grant can come in. Grants are essentially free funding that does not require repayment. These grants are often given by government agencies, non-profit organizations and private companies, depending on your eligibility. 

Grants vary a lot in their eligibility requirements. Types of grants include those for minority-owned businesses, niche industries, relief grants, grants for women entrepreneurs and more. Just note that not all new businesses will qualify for every kind of grant.

Grants.gov gives you all the information you need about grants administered by government agencies. Key in your criteria on the search page and make sure to tick “Small businesses” under “Eligibility” to find all grants suited to you. Other than grants issued by government agencies, there are grants provided by private companies too such as women grants by Eileen Fisher and Amber Grant, and this Veteran Small Business Award


  • No repayment required
  • Many different types of grants are available


  • Competition to obtain the grant may be stiff
  • Grants cannot help you build your business credit score
  • You incur tax on grants received
  • Submitting grant proposals can be time-consuming
  • Not all grants are designed for brand new businesses


Personal savings

It can be daunting to invest a chunk of your savings to start a business, especially since a new business can take time to generate revenue and turn profitable. But if you have a business plan that has been market validated, starting out with your personal savings is a viable option that can be rewarding with some sound planning. 

Keep in mind that your personal savings don’t only include your bank balance but also access to your credit cards and mortgage financing. Plan ahead and set aside at least a year’s worth of money for your essentials while you focus on building your business from the ground up. 


  • No waiting time for external capital funding
  • No huge monthly repayments 


  • Your ability to scale your business depends largely on the amount of savings you invest
  • If your business doesn’t grow according to plan, you run the risk of losing your savings and possessions


Friends and family

Investments from friends and family are a common way for new small business owners to fund their startups. You may find it uncomfortable to broach the topic but here’s an alternative viewpoint — many people are keen to make investments and generate income on the side. If your close ones trust your business acumen and startup idea, they’d be glad to have the opportunity to invest in the early stages of your business. The key is to be honest, upfront and open when pitching for investments or a loan and keep the process professional to avoid any complications.



  • Easier to obtain than loans from financial institutions and external investments


  • You run the risk of having strained relationships if things go wrong
  • Preparation of documents and contracts need to be in place


Venture capital

Venture capital isn’t just reserved for when a business reaches a certain size or profit level. Though VC funding is more common and readily available for technology companies that show potential for being major market players, it’s becoming more common for other types of businesses. For example, though not true equity funding, ClearCo provides something akin to angel investing for e-commerce businesses with their ClearAngel product.

For very early-stage businesses, funding from angel investors can be a great way to get the ball rolling. Angel investors are willing to provide startup capital in return for shares in the company. This is called equity funding, and means that you would pay the investor back in ownership rather than in cash (like you would pay back a bank loan).

One of the more accessible ways to gain access to angel investors is by participating in programs such as incubators and accelerators. These incubators and accelerators provide advice, guidance and various forms of support for businesses in the startup phase to scale up. Typically, organizers of accelerators have a working relationship with a network of investors. These accelerators count as a vetting process for startups and you are more likely to get the attention of angel investors this way.


  • You get to build your business network, gain professional advice, access to investors and mentoring opportunities
  • Recognition and validation from graduation from a high-caliber program


  • May need to give up some stake in your company early on
  • Eligibility requirements of accelerators can be rigorous



If you have a unique idea for a product and service that could readily appeal to the masses, listing on crowdfunding platforms is the way to go. Since the criteria of crowdfunding platforms differ from one another, do some research and find one that meets your current business standing and goals. A couple places to start are Kickstarter and IndieGogo. While these are “true” crowdfunding platforms, don’t forget about Patreon, GoFundMe, or even Substack if a paid newsletter fits into your business plan.

It's important to set the right funding goal to gain campaign traction and raise enough funds to level up your business. While you don’t have to give up equity or take on debt when crowdfunding, rewarding contributors in kind with discounts or early access to your product is a thoughtful way to build your brand. 


  • A powerful way to market your business and get noticed by customers and investors


  • Certain crowdfunding platforms may charge you a certain percentage of funds raised or disallow you from collecting funds if you target amount is not met


Vendor financing

Also known as trade credit, vendor financing is when a business is extended credit by a vendor for the purpose of purchasing that specific vendor’s products or services. Most often, this comes in the form of “NET-30” payments, which means that a business has 30 days to pay back an invoice. Though not long-term financing, such terms can not only take the edge off of having to pay back large amounts, but also help build business credit if the vendor reports to the bureaus.

Here are the three most common types of vendor financing:

  1. Debt financing or trade credit: The lender is repaid with interest on the loan amount.
  2. Equity finance: The lender is repaid in the form of your company shares, inventory or services instead of cash. This is more common for startups.
  3. Store credit cards: You get a revolving line of credit for stores you frequent on top of other rewards and benefits.


  • Better working relationship with your business vendors
  • Helps your business build strong credit histories with vendors
  • No need to take up bank financing until necessary 


  • Often imposes high interest rates
  • Business credit reporting varies by vendor


Merchant cash advances

As an alternative to traditional loans, merchant cash advances are given based on the credit card receipts of your business. Your daily credit card sales are used to determine if you have the capacity to make repayments. Merchant cash advance companies take a percentage cut of your credit card or debit card sales until you have paid back the advance in full. 


This is an option to consider if your business is new and does not yet qualify for traditional bank loans. Just keep in mind that even though MCA’s are among the most accessible forms of financing for new small businesses, many still require at least 6 months to 1 year in business. 


  • Fast approval for access to quick capital to cover unexpected expenses
  • No need for a perfect credit score
  • No collateral
  • Flexible repayment based on credit card sales


  • Short repayment period between 90 days to 18 months
  • Not regulated and providers are not bound by law to maintain a standard interest rate
  • Higher interest rates than traditional loans


Personal loans and other methods

Business funds aren’t the only choice you have to get started. When you’re first starting out, you’ll likely have to combine personal funds with business funding. Here are other unconventional funding options to consider. Bear in mind that we recommend being careful with how much you leverage your personal financial well-being for your business. Take informed risks!

401K withdrawals

Your employer-sponsored retirement account or 401k lets you borrow funds to start your business but only if your program administrator allows it. You can take out a 401(k) loan to finance your business— roll over your balance into a new 401(k), called rollovers for business startups (ROBS). 



  • You avoid paying taxes and penalties on the money you use for your business—as long as you pay back the loan.
  • Lower interest rates
  • No credit checks and easier to qualify for than other types of business loans.
  • You’re paying yourself back instead of being indebted to a third party.
  • Defaulting on the loan will not affect your credit score



  • On top of interest rates, you may also need to pay issuance and administration fees
  • Lost investment earnings from taking out the loan puts your retirement on the line
  • Losing your job or quitting while the loan is outstanding makes the entire balance due in 60 days.
  • Defaulting means you’ll be responsible for paying income taxes, plus a 10% penalty on the entire balance for those under 59½


Personal credit cards

A personal credit card is especially handy to cover expenses when you are first getting started. If you’re going to go the personal credit card route, consider getting a credit card that has an introductory 0% APR offer. As of April 2022, the Chase Freedom Unlimited fits this bill, with 0% APR for the first 15 months. Just keep in mind that you can still face penalties if the minimum payments are not met, and should pay back your balance before the intro offer is up, or else face hefty charges.



  • Many of these cards offer cash backs and rewards that may be beneficial to your business



  • Using a personal credit card for business expenses makes financial reporting difficult and does not help build your business credit score


Personal loan

Access to a business loan in the early stages of business may be difficult to obtain with little to no business credit history. In this instance, a personal loan can give you the starting boost you need. Credit Karma has a tool to help you find your best option if you’re interested in going the personal loan route.


  • Better interest rates and terms than taking out a loan from your 401(k) plan


  • You’ll need a good personal credit score to qualify or put down collateral


Sell assets

Divesting part of your assets to get funding is a great option to consider to fund a promising business venture. Assets can include any stocks you may own, crypto assets, real estate, and more.


  • No need to give up company equity or take on debt before your business is ready


  • Deciding which assets to sell can be tough

Asking for a pay raise

If you are planning to take a plunge into starting your own business eventually or as a side project, negotiating for a pay raise at your day job now will be beneficial. Proactively communicate your wins at work and demonstrate the value you bring to your work. If you can, set aside all the extra funds for your small business.


  • Help you build more savings quicker


  • Unlikely to be a substantial amount of money or enough to be your sole source of business funding


Home equity

A home equity line of credit (HELOC) is usually used to make home repairs or remodel a house. It can also be used as business funding with the home as collateral. However, this method can prove quite risky, as the penalty could be losing your home.


  • Collateral makes it easier to qualify for
  • Low interest rates
  • More flexible repayment 
  • A large amount of financing depending on the value of your home


  • Defaulting in the case of your business facing a downturn may result in house foreclosure


Funding options that are likely off the table


Small Business Association (SBA) loans

If you are just starting your business, getting loan approval with little to no credit history can be a tough game. The SBA makes it easier for small businesses to get loans by setting up loan guidelines and reducing lenders’ risk. Even so, most SBA loans require you to be in business for at least 2 years to be eligible. SBA’s Lender Match tool can be helpful in helping you find lenders but does not guarantee you will be matched or offered a loan. 


The primary types of loans  offered by the SBA are as follows:

  • 7(a) Loans: The SBA’s primary loan program which guarantees a portion of the total loan amount, interest rates are capped and other fees are limited.
  • 504 Loans: Long-term, fixed-rate financing to purchase or repair real estate, equipment, machinery, or other assets
  • Microloans: The smallest loan program providing loans $50,000 or less to help businesses start up or expand


There are many types of 7(a) loans offered but the terms and conditions may vary. Among the eligibility requirements is that your small business must be able to demonstrate a need for the loan and use it for sound business purpose. The 7(a) loan is a great option when purchasing business real estate with is maximum loan amount of $5 million but it can also be used for:

  • Establishing new business or expansion
  • Short and long-term working capital
  • Refinance current business debt
  • Purchasing furniture, fixtures and business supplies
  • Revolving funds based on inventory and receivables


While SBA loans absolutely increase access to funding for small businesses, they’re not necessarily designed for brand new businesses. Keep growing, and in a couple years, use an SBA loan to take your next step.

Bank loans

For businesses that are just starting out, bank loans are very likely not an option. Banks often require companies to be in business for one to two years to be eligible for a loan. The best rates and terms usually go to businesses who have at least a five-year profile of healthy business data, such as taxes and credit history. Going through the application process without fulfilling these requirements will likely be time-consuming (often 2+ months) and yield unfavorable results.

Short-term loans

In most cases, your company will need to be in business for at least a year to be eligible for a short-term loan. Similar to longer-term bank loans, you will often need to put down collateral or have good credit standing to qualify. OnDeck is one of the more popular funding options for businesses at least one year in business.

Line of credit

Lines of credit usually have similar requirements to short-term loans. That is, they typically require at least one year in business. In fact, some products that are marketed as “short-term loans” are actually lines of credit. This is the case with Kabbage.


Last word on where to find money to start your business

Business funding in the initial stages of your startup doesn’t have to come directly from banks or other financial institutions. Keep an open mind and consider all your funding streams. Take a good look at your current finances and weigh the advantages and drawbacks of all your options carefully. Reach out to others in your network with similar business experience to gain more perspective and make an informed choice. The right funding amount and source will give you a confident start to achieving growth. 

About the author

Kiran Sidhu

Written by Kiran Sidhu

Kiran is a freelance writer and content manager at a B2B startup. As a finance graduate, her past stints include the global markets department at an international bank and as a journalist for a business and tech publication.

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