18 Ways to Get Money to Start a Business

Nevertheless, hundreds of thousands of individuals a year do find the money to start a business. How do they do it? More importantly, how can you get funds for a new business? Consider these startup financing solutions. Some are nearly risk-free. Others involve significant financial risk and should be used with caution.

18 Ways to Get Money to Start a Business

1. Use your savings. The first place to look for money to start your business is your savings. Depending on how much you need to get the business started, you may be able to use your savings, an inheritance, or some of your disposable income to get the business going. Be sure, however, that whatever money you invest in your new business, is truly “disposable.” There’s always a risk your business won’t succeed, so it would be inadvisable to invest your retirement savings or other money you expect to need in the future. You should also be sure you keep enough money set aside to handle normal “emergencies” such as car repairs, and similar unexpected expenses. In addition, minimize the risk,  by spending a little time learning how to start a business the right way.
2. Live frugally – and invest the savings in your business. You don’t have to live like a pauper or waste hours searching for 50-cent-off coupons to live frugally. A few simple changes may save you hundreds of dollars a month. For instance, when one Newsday reporter tallied up what she spent on buying lunches, family meals, and fancy coffee drinks, the total for one month came to $645.75. Depending on how much coffee you drink, making it at home or in the office instead of buying it at Starbucks or Dunkin’ Donuts could save you $10 or $15 a week. Bringing your lunch to work instead of ordering it out could save you another $20 or more a week. Eating a home-cooked meal instead of ordering out, eating out, or bringing home fast foods could save you yet another $20 or $30 a week, plus any tips you’d give the Grub Hub or other delivery people. Turning your thermostat down a degree or two during the heating season, and turning it up a degree or two when you have the air conditioning cranking away will save you significant amounts of money during the year. By reducing impulse buying and purchases of non-essential items, you can save even more.
3. Use a credit card. Using a credit card – if you have good credit – is the easiest way to get money to start a business. Equipment, suppliers, advertising, and postage (for mailings) can all be purchased with a credit card. And if your credit card gives you a line of credit, you can give yourself an instant loan (up to your credit limit). But using a credit card to start your business bears some significant risk, too. With the interest rates on credit cards ranging from about 13% to as much as 20% or more, you can quickly run up a huge credit card bill if you don’t pay off the balance each month. The debt is one you’ll be responsible for paying whether your business is successful or not.
4. Start part-time. If you need a steady source of income to meet your financial obligations (and keep your family covered by health insurance) start the business as a part-time venture. Don’t quit the day job until the part-time business has a steady flow of customers and profits.
5. Get a part-time job. If the business you want to start can’t be started as a part-time business or still requires more money than you have, take on a part-time job in addition to your full-time job. Put the part-time income aside until you save enough to launch the business
6. Start the business from home. You may be able to start a business with no money if you work from home and don’t have to foot the bill to rent office space. While you may not want to advertise the fact that you work from home, you will have plenty of company. According to a Frequently Asked Questions fact sheet published by the US Small Business Administration Office of Advocacy in September 2019, 60.1% of all firms without paid employees are home-based, as are 23.3% of small employer firms.
7. Don’t stock up on inventory.  Money invested in inventory is cash you don’t have available for other needs. To minimize your need for startup funding, buy as little inventory as possible until you see how fast the inventory sells. Depending on what you plan to sell, you may be able to use a drop shipper to manufacture your product on demand and ship it directly to your customers. There are several drop ship companies, for instance, that will print your custom designs on t-shirts, coffee mugs, smartphone cases, and other items as they are ordered, then ship them to your customer under your business name. Using one of them can provide you with an inexpensive way to test and sell products. If you have some other type of product in mind, check with manufacturers to see if they will drop ship for you. Once you know what sells best, then you can see if stocking inventory and shipping it yourself would be more cost-effective.
8. Get advance commitments for work. To bring in startup money, line up one or two sources of business before you take the plunge. Former employers, if you left on good terms, are often a source of start-up work, or sometimes funding. Big companies that can send you their overflow work or small jobs that they don’t want to do can also provide the initial stream of work and income.
9. Rent equipment and tools needed for your business instead of buying them. If you don’t have a lot of money to lay out for tools and equipment – or you aren’t sure how much you’ll need any item – look into renting what you need on an as-needed basis. There are places to rent everything from power tools to backhoes. Then, when the business has cash coming in, buy only those items the business uses regularly.
10. Buy used equipment instead of new. Sure, it’s nice to start a business with shiny new equipment, desks, and file cabinets. But you may be able to save a significant amount of money by purchasing items you need to use. Search the web for “used restaurant equipment,” “used laboratory equipment” or “used office furniture.” Watch Craig’s list, and local newspapers for going out of business notices. Local garage and “moving” sales may also be a source of inexpensive items to use.
11. Apply for a microloan. Microloans are small loans available through a variety of resources including community sources, online lenders, and peer lending groups. The size of the loan, eligibility, interest rates, and terms vary according to the source. Read this article for more information on microloans and lenders.
12. Consider crowdfunding. Crowdfunding sites make it possible to raise small amounts of money from a lot of people if you can interest them in your project or business. A word of caution: Remember that crowdfunding makes the idea for your business product or service public. If you need to keep your idea confidential, don’t use crowdfunding. Talk to an intellectual property attorney before publicizing anything unique and potentially patentable.       
13. Apply for a home equity line of credit. Some banks offer home equity lines of credit that let you borrow up to as much as 75% of the appraised value of your home. Depending on the value of your home and what you still owe in other mortgages, that can put a significant chunk of money at your disposal for funding a business. The downside: you’re putting your home at risk. If the business fails and you can’t repay the loan, you could lose your home. If you decide to go this route, be sure to read the Federal Reserve Board’s information about home equity lines of credit.
14. Apply for a business loan instead of a home equity loan. To get a business loan, you’ll need to provide the bank with information that includes: the purpose of the loan, projected opening-day balance sheet (new businesses), lease details, amount of investment in the business by the owner(s), projections of income, expenses and cash flow, signed personal financial statements and your resume. You may also need a formal business plan. (If you’re trying to get funding to grow a business you’ve already started, you’ll also need business financial statements for the last three years, and information on receivables, payables, and outstanding debt.) Don’t be surprised if the bank turns you down, though. Banks are often leery of lending money to startups.
15. Ask Your Bank About an SBA-guaranteed loan. If the bank turns you down for a business loan, ask them if they’ll consider your loan through the SBA guaranteed loan program. If they agree to do so, they’ll forward your loan application and credit information to the nearest SBA district office, for a decision.
16. Borrow from family and friends. Family and friends are a frequent source of small business startup funding. But remember, you have to live with your family for a long time – and you probably want to stay friends with your friends. So, don’t borrow unless you have a business plan and have done enough research to know there is a market for what you want to sell. Be sure your plans provide a way to also pay interest on the money borrowed from family and friends.
17. Look for angel capital groups in your area if your business has the realistic potential to grow to a significant size., (Your local SBDC or SCORE office may be able to point you to a group in your area.) You’ll need a business plan and be able to prove that you have the experience to run the business and that the business will make enough money to make the investors a nice profit on their investment. Learn what angel and venture capitalists look for in our section on finding investors.
18. Consider applying for a loan through peer lending sites

For additional suggestions see this list of common sources of financing for small businesses as well as the articles on our business loans and financing topic page.