How to Fund a Small Business: 9 Options Compared

Most new businesses combine more than one source of money. The right mix depends on how much you need, how fast you want to grow and how much control you want to keep. Here are the main options and what each will expect to see in your business plan.

1. Personal savings

Using your own money is the simplest option and shows lenders and investors you have something at stake. Most lenders expect owners to put in some of their own cash. Use the startup costs calculator to see how much you can cover yourself.

2. Friends and family

A common source of early money. Put the terms in writing, whether it is a loan or an ownership stake, and share your plan so everyone understands the risk.

3. Bank term loans and lines of credit

Banks lend to businesses that can show they will repay. Expect to provide a business plan, financial projections, a personal financial statement, tax returns and collateral. A line of credit can cover short-term cash gaps. See our bank loan business plan template.

4. SBA-guaranteed loans

The US Small Business Administration guarantees part of loans made by participating lenders, which can make it easier to qualify and get longer terms. The 7(a) and 504 programs are the best known. The application is made through a lender, which will want a full plan and projections.

5. Microloans

Nonprofit lenders and community development financial institutions offer smaller loans, often under $50,000, and many provide coaching. A simple business plan and a cash flow forecast are often enough.

6. Equipment and vehicle financing

If most of your startup cost is equipment, trucks or machines, the equipment itself can secure the loan. Use the loan payment calculator to compare offers.

7. Angel investors and venture capital

Investors buy a share of the business in exchange for money and expect fast growth and a large return. This suits scalable startups, not most local businesses. You will need a pitch deck, a plan and detailed financial projections.

8. Grants

Grants do not need to be repaid but are limited and competitive. They are most common for research, nonprofits, agriculture, rural businesses and specific communities. Check federal, state and local economic development programs, and avoid paying anyone to find grants for you.

9. Crowdfunding

Reward-based crowdfunding lets customers pre-order your product, which also proves demand. Equity crowdfunding lets many small investors buy shares under specific securities rules.

What every funder wants to see

A clear explanation of what the money is for.
Realistic, well-explained projections.
Your own money and time committed to the business.
A plan for slower-than-expected sales.

Free help is available from Small Business Development Centers and SCORE mentors in most areas of the US.

Frequently asked questions

What is the easiest way to fund a new business?

Personal savings and help from friends and family are the most common sources for new small businesses because they do not require an operating history.

Do I need a business plan to get a loan?

For most bank and SBA loans, yes. Lenders use the plan and financial projections to judge whether you can repay.

Are there free grants to start a business?

Some exist, mostly for specific groups, industries or locations, and they are competitive. Be wary of websites that charge a fee to access grant money.

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