Small Business Funding Raining Coins

10 small business funding options — from angel investment to traditional loans

36 min read
Geoff Scott

This article was originally published on Sept. 30, 2019, and updated on Feb. 26, 2021.

Often, all it takes is a little money to get the ball rolling for a young (or new) company. But what options are out there to acquire the necessary small business funding that a startup needs to put things in motion and actually begin growing?

Fully understanding the choices available — as well as the process of how to raise capital — are the factors that set many successful young businesses apart from their counterparts.

And while these startup funding options aren’t always intuitive, it only takes a bit of effort to absorb and understand them.

Small business funding guide

This comprehensive guide was created to act as that bit of effort. It aims to help entrepreneurs and small business owners get up to speed on myriad funding options for new and fledgling ventures.

Before we dive into the specific small business funding options, though, we’re going to take a close look at 5 recommended preliminary steps to take prior to exerting energy raising capital (because everyone has to start from somewhere).

Then, we’ll take a deep dive into 10 small business funding strategies (with pros and cons of each) to help you better understand the choices at your disposal, so you can get the financing needed to succeed.

  1. Bootstrapping and personal loans.
  2. Crowdfunding.
  3. Small business financing via angel investment.
  4. Equity fundraising.
  5. SBA loans.
  6. Other types of small business and startup loans.
  7. Small business grants.
  8. Business credit cards.
  9. Business credit lines.
  10. Equipment financing.

We'll round out this guide with some additional startup and small business funding options to consider.

Ready? Let’s make it rain!

Editor’s note: This content should not be construed as legal or tax advice. Always consult an attorney or tax professional regarding your specific legal or tax situation.

Preparing to raise capital: 5 key steps

Small Business Financing Colorful Steps

Raising money may feel like a daunting prospect if you’ve never done so before, but it’s a process that becomes less intimidating with a bit of preparation. Follow these five steps, and you’ll be in good shape when it comes time to meet with banks, investors and other potential contributors of small business funding.

Solidify your business plan

If you’re an established business owner, you already understand the value of a fine-tuned business plan. But if you’re new to the entrepreneurial game or creating your first startup, it’s important to not overlook this key step in the small business funding process.

While viable business plans are comprised of numerous components, there are certain ones that are more critical than others. To create a business plan compelling enough to inspire startup funding, make sure you hash out these four key elements:

Element 1: Your value proposition

If you’re to have any hope of rounding up startup funding from investors, you need to have a well-thought-out value proposition. Understanding what your product or service brings to the table and being able to clearly explain this to others is essential.

If you’ve made it to this stage, you likely have a good idea of what this value element is. But have you explained it in writing before? Have you given anyone the “elevator speech” — the abridged version of what value you’re bringing to the market with your startup?

Related: What is an elevator pitch and why your business needs one

Element 2: Customer segments and relationships

Unless you’re pitching the next Google-type product, there’s a good chance you won’t be marketing your business to everyone (if you are, best of luck). Since you’ve already hashed out a sound value proposition, you should have a rough idea of what segment of the population might be interested in your product.

Do your research ahead of time, so you have some concrete, quantifiable data to share here.

Writing out your target demographic — including details like projected age range, gender, geographic location, education level, etc. — will help investors assess whether the potential is there or not for your business.

You also want to highlight how you plan to interact with this demographic, because this will (ideally) reflect a better understanding of your audience as well as your ability to connect with them.

Related: Why a target audience matters — and how to find yours

Element 3: Revenue streams

What’s your strategy for making money? It’s possible you have several in mind. For instance, maybe you intend on facilitating in-person sales, online credit card processing and even recurring ACH billing for a membership program you have in place.

Make your methods exceedingly clear in your plan.

Note that if you’re planning on opening a business considered risky by banks, you’ll need to work on opening a high-risk merchant account to ensure your revenue continues to actually keep streaming into your coffers.

It’s an encouraging sign to investors that you have your payment processing needs sorted out, and makes your ability to eventually pay them back much more apparent.

Related: 5 keys sections to include in your business plan’s financial projections

Element 4: Key activities and resources

Do you have any competitive advantages or ways of tapping into your industry’s market that set you apart from other businesses? Maybe you plan on simply doing something in a more efficient way than your competitors.

Such details will play a large role in how much your business plan resonates with interested listeners.

Also bring to light what resources you currently have to work with and how they can be wielded to help your customers. Things like human resources, additional capital, intellectual property — these details are valuable, and give your business plan some weight.

If you’re starting from scratch here, that’s OK, but having some type of resource to leverage makes your business instantly more compelling.

Lastly, it’s important to remember that while a business plan is crucial for small business financing and startup funding efforts, it holds more value than just that. Specifically, it acts as a guide that you can constantly turn to during those less stable early stages, plus it can help you in day-to-day operations.

Bonus resource: Slideshop Seed Fundraising presentation deck

Slideshop Seed Fundraising Presentation Deck

Slideshop’s Seed Fundraising presentation deck can help you tell your story and excite your investors. It even includes animation to grab your investors’ attention.

Available with a subscription, the PowerPoint template includes slides that will help you convey the following:

  • Your team
  • Your advisors
  • Company overview
  • The opportunity
  • The market size
  • Competitor analysis
  • High-level financials

Slideshop’s premium content also comes with a complimentary "Designer Pro Tips" slide to help you get the most out of this presentation template.

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Know your numbers

Some founders shy away from the financials, and put most of their energy into their product or service. While that enthusiasm and passion is ultimately what drives them to run their own business, none of it is possible without a solid understanding of the books.

Even if you decide to separate yourself a bit from the financial side and outsource your funding efforts, you should still learn how to read the statements and projections.

Potential lenders and/or investors will expect a clear explanation of your venture’s key metrics (e.g. gross margin, net income, cash requirements, monthly burn rate), use of proceeds, growth projections and, in the case of investors, their estimated ROI.

Numbers are the key to making a compelling case for your business.

Without them your chances of acquiring the small business funding necessary to thrive will greatly diminish.

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Begin to build business credit

When you first enter the entrepreneurial world, you soon realize that personal credit can only get you so far as an owner, and that building business credit is imperative to your long-term success.

Taking time to build business credit during the early stages of your startup means that you’re setting yourself up to get approved for the loans needed to expand later.

And while this step is a gradual one, over time it will solidify your financial standing with banks and investors, as well as establish your business as a trustworthy organization to work with.

Plus, as you build business credit your interest rate for loans will gradually decrease. By understanding how business credit works, you can put your business in a better position financially.

The four credit bureaus for businesses

There are four credit bureaus that assign business credit scores:

  • FICO assigns a Small Business Scoring Service (SBSS) score from 0 to 300.
  • Dun & Bradstreet assigns a PAYDEX score from 0 to 100.
  • Equifax assigns three scores: a payment index from 0 to 100’ a credit risk score from 101 to 992’ and a business failure score from 1,000 to 1,880.
  • Experian assigns a business credit score from 0 to 100.

If you’re in the market for a business loan, the FICO SBSS score is popular with banks for pre-screening, and most require a minimum score of 160. Without any business credit history, the highest possible score is 140, so you can’t rely on great personal credit to obtain a loan.

But remember, lenders could choose to pull any of your business credit scores, so it’s in your best interest to work on all four of them.

How business credit scores are calculated may be complicated, but building your business’s credit doesn’t need to be.

Follow these strategies to help collectively build business credit across all four bureaus.

Strategy 1: Set up an LLC or corporation

You can only build business credit if your business is legally a separate entity from yourself, meaning you’ll have to establish an LLC or a corporation.

While it’s easiest to form an LLC or incorporate your business in your home state, some business owners choose to do so in another state with more favorable business laws for their particular business model.

To further establish your business as a distinct entity and not a sole proprietorship, consider putting together an LLC operating agreement. It’s not required in most states, but having one looks good to investors and creates operational parameters in the event of disputes.

Strategy 2: Make payments on time

Every credit bureau uses your business’s payment history as a factor in determining its credit score. Needless to say you shouldn’t miss or postpone paying your bills, or else all that energy you spent to build business credit will largely be wasted.

If you needed further incentive: Dun & Bradstreet bases its PAYDEX score entirely on payment history, and to get a 100 (their highest score), you’ll need to make payments 30 days in advance of the due date. If that’s too much of a challenge for your particular enterprise, paying on the actual due date results in a score of 80, which still falls in the bureau’s low-risk range.

Strategy 3: Keep your credit utilization below 30 percent

Equifax, Experian and FICO all use credit utilization as a factor in calculating business credit scores, so it’s another factor worth monitoring and addressing.

Credit utilization is the amount of debt your business has compared to the amount of credit it has available. However, what credit bureaus weigh most heavily are balances on revolving lines of credit.

Let’s say that you have multiple business credit cards, and their credit limits add up to cumulative $50,000. If your total spending amounts to $10,000, your credit utilization is at 20 percent.

To effectively build business credit, it’s essential to keep your utilization down.

Strategy 4: Track your credit with each bureau

Unfortunately, free credit reports are a consumer luxury rather than an entrepreneurial one. However, purchasing them through each credit bureau for your business once or twice a year is still a worthwhile investment. Doing so allows you to check your various scores and check for errors.

You might also discover that your business’s credit history is missing information about payments to certain suppliers and lenders. Not every company reports payment information to the credit bureaus. If some of your payments aren’t reflected in your business credit report, you can contact these particular companies and request that they start reporting them.

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Establish or strengthen your business's online presence

Whether you’re running a small mom-and-pop bakery or are aiming to take the world by storm with a revolutionary SaaS platform, you’ll want to have a well-curated online presence. At the time of writing this piece, there were nearly 4.2 billion internet users across the globe. Not using this to your advantage is a big mistake.

You don’t need to run a monster website to receive small business financing, but there are several actions you can take that will increase your chances of impressing lenders and getting the cash you need.

Get a professional domain

A business without a legitimate domain name tied to it does not look great to prospective investors.

Thankfully, this is something that is easily rectified — all you need to do is research available domain names, and buy one that falls within your budget and makes sense from a branding standpoint.

Go ahead — give it a try:

Related: How to buy a domain name

Purchase email addresses for that domain

Domain registrars often provide packages where you can get professional email addresses that include the domain name. This is a smart idea for several reasons.

In terms of startup funding, a business email is simply more authoritative than a generic email account.

Your professional email shows that you’re serious.

Additionally, this type of email address is more likely to stick in the mind of an investor and customer. At the very least, you want your email address to make an impression when communicating with anyone contemplating an investment in your company.

Related: How to use a custom domain name for email

Create a website

You can bet that potential investors, like potential customers, will search for your business online. Having a professional-looking website will likely give you a leg-up in securing small business financing.

And it doesn’t require a big investment of time or money.

Sure, having a highly customized website that covers all the online needs of your business is the dream, but early on, a simple website that covers all the basics will suffice.

You can use a free DIY website builder to create an effective, professional-looking website in under an hour.

Small Business Funding Create Website GoDaddy
GoDaddy’s Website Builder makes it a snap to create a beautiful business website.

Related: How to start a website from A to Z

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Do your research

If you really want to know how to raise capital effectively, it will take time and research.

You might already have some great leads on investors and are feeling optimistic, but keep deep-diving into competitor analysis, hashing out your business plan further, and learning more about the unique angles and resources available to your particular business.

For instance, if you’re a female entrepreneur, there are some excellent business loans for women that you can explore. Likewise, a number of venture capital firms specialize in startup funding for female founders.

Look into angel investors and fundraising organizations in your city, because many such individuals and groups prefer to support local startups.

Taking every angle when approaching the startup funding process will increase your chances of finding suitable contributors.

Of course, the internet hosts plenty of information about small business funding opportunities — even providing them in the form of online platforms that exist solely to source capital.

Finally, doing your due diligence will help assure you’re actually pitching to the right people (i.e. interested ones who share your values). For instance, if you found an opportunity presenting your ideas for a SaaS company to a group only interested in medical technologies, it would be a waste of your time (and theirs).

Investors who have a track record working within your specific industry or at least profess a strong interest in your business model will help you get the startup funding you need.

Be sure to research the investment portfolio and culture of each group you’re appealing to, and then try to find a champion or mentor within that group who seems well-suited to fighting the good fight in the name of your startup.

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How to raise capital: 10 small business funding options

There are many ways for industrious entrepreneurs to procure the small business financing they need these days — but which way is the best? The answer is not so simple, and each way comes with pros and cons that you’ll need to consider before going all in on one (or several).

These 10 small business funding options provide an overview of the main choices out there, and give you an idea of how to raise capital successfully.

1. Bootstrapping and personal loans

How to Raise Capital Bootstrapping Coin Piles


Originating from the expression “pulling yourself up by your bootstraps,” bootstrapping involves financing your business entirely with your own money. You’ll start out using your savings, and once you’re earning a profit, you can reinvest that money into your business.


Since you’re only using your money, you avoid paying any interest. Plus, you won’t put your credit score at risk like you would with a credit card or loan. (That doesn’t mean you shouldn’t build business credit as a bootstrapper, however).

You’re also keeping ownership solely in the hands of yourself and your partners, rather than investors who might not have the same vision as you do for the future of your business. If you’re worried that others might steer your company off course, then this may be the best small business funding option available.


A major drawback with bootstrapping is that your resources are simply limited — whatever you’ve got saved in the bank is all you have to work with. Exclusively bootstrapping could end up slowing down the expansion of your business, and turn what could be quick growth into a taxing slog.

Who should consider bootstrapping?

Bootstrapping is the American dream, and as such provides everyone an opportunity to try and run a business their own way. If you’re a freshly minted graduate out of college with hardly a dollar to your name, though, bootstrapping is going to be much more of a grind than if you have a sizeable savings account and have accumulated various assets.

Also, if you’re not prepared to be frugal — with everything —bootstrapping might not be the best choice for you. With resources all coming from your own checkbook, you’ll need to minimize expenses at every possible turn.

Personal loans

If bootstrapping 100% isn’t practical for your particular business model, you can try pairing your own finances with a personal loan. As an aspiring startup, your financial history is likely limited, making the process of getting a business loan more difficult. But you can get a personal loan to help inject some cash into your company’s development.


Your business won’t be considered in your loan application, so if you’ve built a strong credit history over the course of your life, you’ll be in good shape to get a personal loan. Interest rates for those with excellent credit ratings average around 10%-12%, but could be even lower depending on the lender.


If your credit history isn’t respectable, you probably won’t qualify, and even then the rate might be too extreme (upwards of 30%).

Also, the amount you can borrow is much more limited in comparison with a standard business loan, unless you’re already exceptionally wealthy with a pristine credit report. If you’re looking for a six-figure lump sum to kickstart your business, a personal loan isn’t going to get you there.

Who qualifies?

To qualify for personal loans that have competitive rates, you’ll ideally want good or excellent credit, which requires a FICO score of 690+. And just because you qualify doesn’t mean you’ll want to take the loan at the rate offered.

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2. Crowdfunding

Small Business Financing Crowdfunding Raised Hands

If your personal bank statements are looking a bit lean and you’re struggling to qualify for various types of loans, hope is not necessarily lost.

One interesting small business funding strategy that has exploded in popularity recently could be your ticket to business growth. Are you ready to give crowdfunding a try?

While many people think of crowdfunding platforms as places where you go to cover the cost of a family member’s surgery or help support a friend’s dream of building homes in impoverished countries, they can also be excellent places to attract startup funding.

With crowdfunding, you’re essentially asking the public to fund small pieces of your business in return for discounts, material goods/products and other established perks.


Crowdfunding is a great way to create hype in the early stages of a business, and it also helps you gauge the demographics who may be interested (or not) in your product or services.

Not to mention, in the event that your campaign fails to reach its desired goal, there’s a lot less to lose than if you have to default on a loan.


Your business ideas could get poached if you haven’t taken the proper measures to legally safeguard them through patents and registered trademarks. You have to go into the process prepared, or else you might get burned.

Who is most suited for crowdfunding?

If you have a business idea and can’t seem to qualify for startup funding, you might want to give crowdfunding a shot. Also, if you’re an effective navigator of the internet and know how to drum up supporters through social media and other consumer channels, it could be a great solution for you.

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3. Small business financing via angel investment

Unlike crowdfunding, which focuses on micro contributions from the masses, angel investment is centered around the idea of finding one or several “angel” investors — accredited business types who hope to grow their net worth by providing startup funding to intriguing ventures.


Angel investors are no strangers to small business financing. They’re veterans, likely in the industry or market your business falls under, and they have deep pockets. Suffice to say, a single angel investor can easily contribute more money to your bank account than the other small business funding options outlined in this guide if you inspire them to do so.

Angel investors also didn’t get to this point in life without accumulating business savvy.

Their contributions to your company’s development will go beyond startup funding. They are now invested in your future success, and they’ll do what they can to ensure their ROI.

Plus, if your business fails altogether, they aren’t going to be chasing you down to repay them. They aren’t a bank, and they understand the risks associated with small business funding.


Tracking down angel investing can be an expensive endeavor, because even making a simple pitch includes gathering and preparing your business information, hiring lawyers and accountants, actually pitching and then following up — some of which involve out-of-town travel.

In the last couple of years many angel platforms have moved online, but the documents and processes involved are still costly.

Then, once you’ve procured angel investment, you’re looking at a relationship in which you owe a very high return, simply because financing a startup is a risky proposition. If your company fails, they lose their investment— or if you have future investment rounds, their investments are subject to dilution.

Who should embrace angel investing?

If you’re trying to launch a startup with a brilliant business idea but are miles away from realizing your idea due to a severe lack of funds, angel investment might be for you. Also, if you operate in a competitive industry where a veteran mentor could give you an advantage over other businesses, an angel investor can help you take that next step.

Just don’t forget about the strings associated with this form of small business funding.

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4. Equity fundraising

Did you know that as a private company, you’re able to sell shares or ownership in your company? With Title III of the JOBS act (passed in 2016) allowing anyone to invest and gain equity, equity fundraising is now suddenly a viable way to approach small business financing.


Similar to crowdfunding, equity fundraising is a great way of building a devoted following before your product or service is even launched.

However, whereas crowdfunding has an established end point (whenever the goods are delivered, discount provided or service rendered), equity fundraising keeps investors in the game.

This means that the your business suddenly has hundreds (or thousands) of minor shareholders who are incentivized to help your brand succeed long after you launch.

Plus, unlike angel investing where a single investor has immense sway over the direction of your company, small shareholders who contributed money through equity fundraising have much less power.

You’re still in the driver’s seat of your own company, which is an appealing prospect for many.


Sorting out equity when you have hundreds (or thousands) of small investors can be a major legal headache, and might end up costing you money in lawyers or business advisers that you hadn’t accounted for in your business plan.

Also, even though you’re not listed on a public stock exchange, you’re still subject to the rules from the Securities and Exchange Commission (SEC).

If you plan on embracing this small business financing method, you’ll want to talk to a lawyer first.

Who is best suited for equity fundraising?

Owners who have a very clear vision of how their business will progress into the future are best suited for equity fundraising. Such a startup funding method keeps influential figures (in the form of angel investors) out of the equation, and keeps you in a position to call the shots.

Also, companies that could benefit from the help of “brand ambassadors” (in the form of minor equity holders) would also appreciate equity fundraising. Businesses need help to succeed, and forming a small coalition of investors interested in making that happen can be a boon for your company.

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5. SBA loans

Small Business Funding SBA Loans Website

Loans available through the Small Business Administration (SBA) are aptly named SBA loans, and if you’re wondering how to raise capital without dealing with investors, this may be just what you’re looking for.

Minimum requirements depend on your particular business and its location, but will typically include a good business credit score, a clear future projection of generating income, possible collateral, and a variety of other factors.


SBA loans have been coined the “Holy Grail” of small business loans by certain entrepreneurs across the United States — and for good reason.

From a cost perspective, SBA loans are the often best choice for small business financing because they offer the lowest interest rates (5% to 9%) and fairest terms (many of them lasting up to 25 years at the same interest rate).

You can also apply for large loan amounts — like, in the millions — that can be used for most business purposes, including long-term fixed assets and operating capital.


The issue most businesses encounter when going the SBA loan route is actually qualifying for one.

While SBA loans are the most traditional small business financing option, they’re also the most difficult to obtain because they demand very specific requirements.

For instance, business owners must have excellent personal credit, demonstrate a “sound business purpose,” adhere to a variety of other eligibility guidelines, and even assess their precise business size according to SBA regulations to determine what dollar range they qualify for (if they even qualify at all).

Who should use SBA loans?

The question might be more aptly phrased as “who can qualify for an SBA loan”? If you’ve been operating for several years and have a proven track record of growth, you’ll be in much better shape to apply and receive an SBA loan than someone looking for startup funding.

If you’re trying to use an SBA loan as a startup or young business, you’re going to face much more of an uphill battle. It’s not an impossible feat, but you’ll need to prove you’re a risk worth taking on.

Related: How to get a small business loan

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6. Other types of small business and startup loans

Outside of traditional SBA loans, other primary loan options include:

  1. Microloans
  2. Traditional term loans
  3. Short-term loans

Here’s a quick overview of these three small business financing options offered by banks, credit unions and online lenders, as well as their associated advantages and disadvantages.


While the name implies a small quantity, don’t be fooled — you could borrow up to $50,000 through a microloan. According to Fundera's Meredith Wood, these types of loans generally start around $500, and SBA microloans average about $13,000 each. Terms last up to six years, and interest rates usually range from 8% to 13%.

Although there are many lenders that offer microloans, the most popular way to find a lender is through the SBA’s Lender Match program.

This program also offers business training, and in some cases requires you to complete that training before it will process your loan application.

When applying for a microloan, expect the lender to ask for proof of income, financial statements and your business plan to show how you intend to use the loan. The lender may also require references.

Pros and cons

If a business credit card doesn’t fit your needs but you can’t qualify for a loan, microloans serve as a nice middle ground. They’re also easier to obtain than business loans, and the interest rates are reasonable.

However, since they generally run through official channels like the SBA, qualifying for one can be more challenging than for other loan types. Also, the amount of money you can get from a microloan is (understandably) not enormous.

If you were looking for a huge boost of capital to get things rolling, a microloan isn’t going to cut it.

Traditional term loans

When most people think of a loan, they’re likely thinking about a traditional term loan. The structure is simple: You take out a loan at an interest rate determined primarily by your credit score and credit history, and incrementally pay it off until it’s fully covered.

Pros and cons

A major advantage of traditional term loans is their timing flexibility — giving borrowers upwards of five years to pay back the loan in full via predictable monthly payments at a fixed rate.

They will also help you build business credit over time, which helps other financing endeavors later on.

However, getting a traditional term loan can end up costing you more time and energy than a short-term loan, plus you’ll likely be required to put up collateral (especially if you’re new to the game). If you’re looking for startup funding, this might not be your ideal solution.

Short-term loans

Short-term loans have payment periods that usually last between six and 18 months. They are also offered by credit lenders, banks and the SBA.

Pros and cons

Approval for short-term loans can theoretically happen in a single day, which means you can get your business’s cash-flow going in a pinch. Overall, they’re less of a hassle to set up than traditional term loans and SBA loans, which makes them appealing to many business owners.

However, with this convenience comes higher interest rates and early repayment penalties. Just be aware of what you’re getting into before signing the dotted line.

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7. Small business grants

Small business grants are divvied out by a variety of organizations, meaning there are a variety of types that you could potentially qualify for. Some of the main categories of small business grants include:

To learn more about the importance of seeking funding, especially for Black-owned businesses, and how to get help with grants, check out this video.


Small business grants are one of the most coveted forms of startup funding, because who doesn’t like the idea of getting “free” lump sums of money for their startup venture?

Plus, qualifying for a grant isn’t hinging on your excellent business credit or your stellar growth rate, making it extra appealing for those involved in the world of startup funding.


Some entrepreneurs refer to landing a small business grant as capturing a unicorn due to its seemingly impossible nature. While there’s no shortage of small business grants out there for you to apply for, most of them are highly restrictive in who they cater to.

If you’re running a standard small business, have no idea how to raise capital, and were hoping that a small business grant was your golden ticket, you’re likely out of luck.

Who are small business grants for?

They can really be for anyone, but they’re especially useful for women, minorities and veterans due to the numerous grants set up for these particular groups.

If that’s not you, however, there’s still hope.

Local and regional small business grants are sometimes available for various reasons — whether it’s to try and stimulate the economy of a downtown area with some new businesses, or to help beautify a more decrepit part of the city, these opportunities do arise. You can check out the U.S. Economic Development Association for more information regarding regional small business grants.

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8. Business credit cards

Small Business Funding Credit Card

Looking to build business credit and simultaneously get some of your startup funding out of the way? A business credit card can help you with both.

It’s recommended that anyone getting involved in the world of startups or small business apply for a business credit card, because there’s no other way to establish great business credit.


If you’re looking for short-term financing, a zero-percent annual percentage rate (APR) business credit card is among your best small business funding options. The zero-percent APR lasts for an introductory period, with most ranging between six and 15 months — making it an excellent deal if you can stay on top of paying your bills. Plus, there’s no collateral involved.

Business credit cards also earn you either reward points or cash back, making it a good idea to use one for all your business spending. That way, you’ll be able to maximize your return and build business credit at the same time.


Credit cards are never good for long-term financing because they tend to have higher interest rates than loans.

They are not an all-in-one small business funding solution for savvy business owners, but rather a complementary resource that operates in conjunction with other financing methods.

Also, you’ll need a good credit score to qualify for those zero-percent APR offers, and when the introductory period ends, the card issuer will charge you interest on your current balance. Make sure you have a plan to pay your card off before the APR goes up, or else you’ll be paying the price.

Who should use business credit cards?

If used responsibly, every business owner should consider applying for a business credit card. It’s invaluable to build business credit over time in the event you ever need it, and it’s something that can get you through minor funding bumps instantly without the paperwork.

Related: 5 ways business credit cards can help startups

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9. Business credit lines

Not to be confused with business credit cards, business credit lines are another small business funding option available to enterprising owners in need of financing options. While they may operate similarly to their plastic counterpart, there are distinct differences.


Business credit lines operate like business credit cards, but with fewer usage restrictions — making them similar to a loan in terms of flexibility. If you established a line with a bank or an online lender, you’ll have a steady source of funds to shell out at any moment to pay for things like payroll, inventory or even future projects.

They can also be used to build business credit, generally have lower APRs than credit cards, and can be accessed by everyone from startups to established small businesses.


It costs money to establish business credit lines (there are often annual fees), and they are more difficult to qualify for if you’re running a startup. Startups may have better luck with online lenders than banks, since the banking system has a strong aversion to risk.

Also, there are limits to credit lines, whereas loans can often end up being much more substantial sums of money.

Who should use business credit lines?

If you’ve been running a company for even one year and prefer the idea of only borrowing money when you need it, a business credit line might be right for you.

Plus, it gives you a chance to build business credit in a way that may seem more official than using the company credit card.

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10. Equipment financing

Startup Funding Office Equipment

Without some amount of working capital, you’re going to find it difficult to buy the things you need to start your business. And although you may be focusing on more product-centric spending in the early stages, if you have a physical office you’re going to need equipment.

You can be certain that these costs pile up quickly if you’re not paying attention.

You’ll find equipment financing options online if that’s a route you’d like to go. Here are some pros and cons of this strategy.


Many of the alternative online lender types who provide equipment financing are ready to take most clients, even those who lack any significant business credit history. Since the equipment itself acts as collateral, creditors have less stringent lending standards.

This means you have a much better chance of getting approved when your business is in startup funding mode.

Plus, lenders are generally willing to finance up to 100% of the equipment’s value. If you’re in need of a small business financing method that’ll allow you to go get that car you need for your new venture, equipment financing can help.


It may be easier to qualify for an equipment loan than many other types of small business funding, but in the end it's the lenders who are getting the best end of the deal. Interest rates range anywhere from 8% to 30%, depending on several factors, making them a potentially more expensive way of handling your money needs early on.

Who should consider equipment financing?

Equipment financing is ideal for startups, as well as businesses who struggle dealing with banks and more stringent lenders out there like the SBA.

Before you explore this option, remember that it’s possible your startup doesn’t need equipment right away. Be sure to not prematurely finance equipment, or else you’ll be wasting money paying interest for goods you’re not even using yet.

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Additional startup and small business funding options to consider

Although we distilled a list of the top 10 small business financing strategies, there are still a variety of other ways to get the startup funding (or any type of funding) you need for your business. Here are a few more ideas to think about:

Enlist a commercial finance broker

Although they don’t act as a direct means of how to raise capital, commercial finance brokers can help you narrow down your available options.

A broker will shop around and discuss possible financing methods with you, and they’re often good at finding you better deals.

A broker could help you save a huge amount of time and by leveraging their experience and expertise effectively. However, since brokers aren’t regulated closely like money lenders are, you should be careful before hiring one, and make sure their reputation is stellar.

Use invoice financing

Invoice financing lets a business obtain an advance based on the value of late, unpaid invoices.

If late-paying clients are affecting your cash flow and choking up your business proceedings, invoice financing is a potentially great solution.

Specifically, it allows you to free up cash that you’ve been owed for an outstanding period, and lets you focus on your actual business rather than hustling delinquent clients.

The way it works

A factoring company will assess the quality of your invoices before deciding on the potential risk involved with lending. They will then advance you a sum worth a certain value of your invoice, collect payments from your clients, and then take back the fee they’re owed before returning any remaining money.

Consider a merchant cash advance

For most business owners, payment processing is an unavoidable part of running business. Did you know that your payment processor likely has merchant cash advances available at your disposal? By giving your provider percentages of your future sales, you can get funding quickly.


Since the advance is agreed upon between a payment processor and their own client (you, the business owner), there is no collateral involved in the process. It’s also fast, doesn’t include fixed monthly payments, and can get you money when banks and lenders turn you away.


Merchant cash advances have higher APRs than traditional term loans (not to mention SBA loans). They also lock you into the same payment processor until your contract expires, which could range from months to even a year and a half or more.

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If you’re looking for the one golden solution to your small business funding woes, chances are you won’t find it. The right financing method for your business is likely a combination of the 10+ options listed above, and there are many factors that play a role in determining which pairing (or grouping) is best for you.

The most you can do is be prepared, do your research and explore the choices available to you at this moment in time.

Certain financing doors might be closed to you for now, but they could open in the future.

Understanding what’s out there can help you ascertain when that time comes, so you can get the funds necessary to succeed with the best possible interest rates (because nobody likes to pay interest). Best of luck financing your venture!

This article includes content originally published on the GoDaddy blog by the following authors: Meredith Wood, Mary Juetten, Roman Shteyn, Dan Hughes, Kristian Rivera, and Edward Wade.

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