15 Best Sources of Startup Funding For Business Loans

Where Can You Get Funding for Your Startup?

It’s an exciting time when you decide to start a business. However, maintaining that momentum and passion as you go on your quest to make your business ambitions a reality is difficult. One particularly perplexing annoyance that might sap the wind from your sails as you establish a small business?

Obtaining finance for a startup.

Small business startup finance is particularly difficult to come by—most standard business loans require one or more years of operation—but that doesn’t imply it’s impossible. In reality, there are 15 fantastic startup funding choices available to you.

• SBA microloans

• Business lines of credit

• Blue Business Plus credit card

• Blue Business Cash credit card

• Ink Business Cash credit card

• Ink Unlimited credit card

• Venture capital

• Angel investors

• Personal savings

• Crowdfunding

• Grants

• Equipment financing

• Invoice financing

• Personal loans for business

• Friends and family loans

 

We’ll walk you through the finest startup business funding sources in this guide to help you decide which is the greatest fit for your business.

Best Business Funding Sources for Startups

In comparison to established businesses, startups often find it far more difficult to obtain capital due to a lack of business history, large income, and established credit. This does not rule out the possibility of obtaining starting capital for your new venture.

The following are the top sources of funding for small business startups:

• Business loans: Debt financing that allows you to acquire funds without diminishing your business’s ownership.
• Business credit cards: These cards let you use your personal credit history to get business credit for your business.
• Alternative sources of startup capital that may be worthwhile based on your business’s specific scenario.

Let’s get into the specifics.

1. SBA Microloans

The SBA microloan program, which was established to make starting business capital more accessible to women, minorities, and veterans, now partners with community-based, nonprofit intermediate lenders to give small business borrowers $500 to $50,000.

Traditional funding with these ideal rates and durations is rarely, if ever, accessible to brand-new businesses outside of this SBA-subsidized program, with interest rates ranging from 8% to 13% and term lengths not exceeding six years.

Traditional funding with these ideal rates and durations is rarely, if ever, accessible to brand-new businesses outside of this SBA-subsidized program, with interest rates ranging from 8% to 13% and term lengths not exceeding six years.

Furthermore, SBA microloan lenders are unique in that the Small Business Administration selects them to work as mentors and lenders with business owners face-to-face. (This is only one of the numerous benefits of SBA loans.) Microloan providers, in this function, serve not only as a source of money for small business startups, but also as counselors, offering advice on business management, marketing, and finance to ensure borrowers’ long-term success.

Having said that, all of those great benefits come with a lot of competition. As a result, the SBA microloan application and approval processes are not only complicated but also time-consuming. In general, applying for an SBA loan can take time, and borrowers may find themselves jumping through what appear to be superfluous hoops in order to meet the program’s standards.

 

2. Business Lines of Credit

Consider a business line of credit if you need a more flexible source of capital for your new venture. A line of credit is a pool of money established by the lender with a maximum credit limit. It’s sometimes defined as a cross between a credit card and a traditional business loan. Up to the credit limit, you can use the line of credit for almost any business purpose and in any quantity.

The most significant benefit of a business line of credit is that you only pay interest on the amount you’ve borrowed at any given moment. So, even if your credit limit is $30,000, if you only withdraw $10,000, you only pay interest on the $10,000 you actually use.

Aside from its flexibility, the business line of credit has a few additional major advantages as a source of startup funding:

• Money can be withdrawn at any moment and for any reason related to business.
• It’s more accessible to people who have bad credit.
• As a startup, this might be a great method to start creating your business credit history.
• Allows for changes in cash flow in the business.

For these reasons, a business line of credit is a viable source of funding for entrepreneurs seeking capital throughout their crucial first year of operations.

Keep in mind that most traditional business lenders will need candidates to have at least six months of business experience when applying for a business line of credit: Many banks are hesitant to take on the risk of lending money to start-up businesses.

3. Equipment Financing

Consider equipment financing as a top choice for funding your business if you require initial cash to purchase equipment. Because of its self-secured character, equipment finance for beginning businesses is especially suited to your needs.

While many equipment lenders will have minimum time in business criteria, a significant number will not. Currency Capital, for example, is one of the top equipment lenders around, and they don’t require a certain amount of time in business.

4. Accounts Payable Financing

Invoice finance is another financial option that you’ll be able to use quickly in your organization. You’ll be able to get a cash advance for a portion of the value of your outstanding invoices with invoice financing.

This type of startup finance requires that your business already has at least one invoiced customer, although many invoice financing businesses only demand that you have been in business for a short period of time to be eligible for funding.

BlueVine, for example, is an invoice financing company that just requires three months of business history to be considered for funding. If your startup meets these conditions, invoice finance may be a viable option for funding your new venture.

5. Personal Business Loans 

A personal loan for business can be worth considering for entrepreneurs with excellent personal credit and a new business idea that you feel confident putting your own money on the line for. These options have the benefit of being straightforward: There are no hidden costs, no complicated formulas, just a straightforward personal loan.

Consider that, in general, a personal loan has lower interest rates and easier payback conditions than a business loan, and it can be used for almost any purpose.

The negative, though, is that when you take out one of these loans for your business, the lender enters into a contract with you as an individual, not with your business. This means that if bad luck hits and the business goes bankrupt, you are still totally and personally liable for the outstanding sum.

6. Family and friends

What if you don’t qualify for any of these starting business loans but don’t want to rely on a business credit card for initial capital?

To support your startup, you can explore approaching friends and relatives. However, if you choose this method of business startup funding, make sure to systematize this usually less-formal form of debt.

Before choosing this potentially dangerous method of starting finance for small business entrepreneurs, consider the Minority Business Development Agency’s useful guidance for borrowing startup money from friends and relatives.

7. Chase Ink Cash Credit Card

The Chase Ink Cash is another excellent business credit card with excellent advantages for beginning business funding. This business credit card comes with a 12-month 0% initial APR period and a $500 cash back welcome incentive after spending $3,000 in the first three months with the card.

You’ll also get cash back at the following rates for the duration of your card membership:

1. On your first $25,000 spent each year, you’ll get 5% cash back:

• Stores selling office supplies
• When it comes to internet, cable, and phone services

 

1. On your first $25,000 spent each year, you’ll get 2% cash back:

• At gas stations
• At restaurants

 

1. 1% cash back on everything else and above those annual spending thresholds

 

If you want to get quick starting cash through a welcome offer and plan to spend a lot of money on office supplies and communication services, the Chase Ink Business Cash should be a no-brainer source of beginning capital.

 

CREDIT CARD

Ink Business Cash® Credit Card.

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• If you spend $7,500 in the first three months, you’ll get a $750 incentive
• plus a 12-month 0% intro APR on purchases.
• Depending on where you spend, you can get 5%, 2%, or 1% cash back.

 

8. Chase Ink Unlimited Credit Card

Finally, the Ink Unlimited is a great business credit card for startup funding. The Ink Unlimited, like the Ink Cash, has a 12-month introductory APR of 0%. The Ink Unlimited will also give you a $500 welcome bonus if you spend $3,000 in the first three months of using the card.

The Ink Unlimited, on the other hand, will give you an unlimited, flat-rate 1.5% cash back on every dollar you spend with it, unlike the Ink Cash. With this source of startup capital, you’ll receive $1.50 for every $1 you spend.

 

CREDIT CARD

Ink Business Unlimited® Credit Card

So, if you plan to spend money on non-traditional business expenses as you launch your new business, the Ink Unlimited is likely to provide you with more cash back than the Ink Cash.

Unlimited cash back and a welcome bonus are great features.

• If you spend $7,500 in the first three months, you’ll get a $750 incentive.
• For the first 12 months, there is a 0% intro APR on purchases.
• Every purchase earns you 1.5% cash back indefinitely.

 

INTRO APR – 0%

REGULAR APR – 13.24% – 19.24%

ANNUAL FEE – 0

MINIMUM CREDIT – 660

 

9. The American Express Blue Business Plus Credit Card 

Business credit cards, as we just said above, allow you to use your personal credit history to obtain business credit to support your business. Even better, many business credit cards, such as the Blue Business Plus, come with a 0% introductory APR term.

With the Blue Business Plus 2-month 0% intro APR term, you can progressively pay off your initial costs without accruing interest throughout the first 12 months of use.

The Blue Business Plus will be an interest-free option for your startup spending as long as you pay back your startup spending within the first 12 months.

 

CREDIT CARD

The Blue Business® Plus Credit Card from American Express

And by the time you’ve had 12 months in operation and your intro APR term is through, you won’t even be considered a startup.

However, you’ll be able to earn rewards points with your Blue Business Plus card for the duration of your card membership—you’ll receive 2x rewards points on the first $50,000 you spend each year and 1x after that.

Making purchases with a 0% intro APR term is ideal.

• 2X points for the first $50K 
• spent over a 12-month 0% intro APR period on purchases from the date of account opening
• There is no annual charge.

 

INTRO APR – 0%

REGULAR APR – 13.24% – 19.24%

ANNUAL FEE – 0

MINIMUM CREDIT – 660

 

10. American Express Blue Business Cash Credit Card

The Blue Business Cash is another excellent business credit card with a 12-month 0% initial APR period that is suitable for funding a small business starting.

Furthermore, rather than bonus points, the Blue Business Cash gives you cash back for your purchases. If you spend $50,000 or more in a calendar year, you’ll get 2% back on all qualified purchases, then 1% back on everything else.

Cash back will be considerably easier and more beneficial to turn into startup investment than rewards points. Plus, you won’t have to pay an annual fee to use all of the features that Blue Business Cash has to offer to help you get your startup finance off the ground.

 

CREDIT CARD

American Express Blue Business Cashâ„¢ Card

Great for: Getting cash back and taking advantage of a long 0% intro APR term.

• Purchases have a 0% intro APR for the first 12 months from the date of account opening.
• Up to $50,000 per calendar year, get 2% cash back on all qualified purchases, thereafter get 1%.
• There is no annual charge.

 

INTRO APR – 0%

REGULAR APR – 13.24% – 19.24%

ANNUAL FEE – 0

MINIMUM CREDIT – 660

 

11. Venture Capital

Wouldn’t it be fantastic to start a new business without going into debt as a startup business owner seeking for sources of funding?

If you’re looking for a way to fund a startup without taking on interest-bearing debt, consider venture capital, which is a type of equity financing. In reality, if you’re in the proper industry—say, a software startup—figuring out how to fund a startup without taking on debt will be rather simple.

Venture capitalists may be waiting up at your door, especially if you have past experience and a strong company idea. VC firms will assess your new business based on factors such as its pre-money valuation, sales, and team, so be prepared to discuss these factors before pitching to any early-stage venture capital organizations.

 

12. Angel Investors

Another fantastic source of startup or early-stage business funding is to seek out angel investors. Angel investors, unlike venture capital, are typically rich individuals who offer operating cash in exchange for a share of a business’s ownership.

Angel financing is often sought during a startup’s early phases of development. Despite the fact that angel investors typically do not invest as much as venture capitalists, they are nevertheless generous individuals who can invest hundreds of thousands of dollars in your business.

 

13. Individual Savings

Have you thought about how much of your own money you’re willing to put into your own business? If you’re confident enough in your new business idea to seek funding from strangers, show your confidence by putting some of your own money into it.

After all, why should anyone else—even those who regularly invest in startups—choose to support your new venture if you aren’t willing to take a chance on it?

Also, if you plan on asking for an SBA loan in the future, this is a good option to take. The SBA prefers to see that a business owner has invested personally in their business; when the owner has a large personal stake in its success, things are more likely to go well.

 

14. Crowdfunding

Using crowdfunding platforms such as Kickstarter and IndieGoGo, you may be able to fund your business by asking a large number of people to contribute small amounts of money to your small business startup. Each backer contribution contributes to your goal progressively, so even the tiniest donation helps—you don’t need an accredited investor to support your business.

Setting up crowdfunding campaigns is also a terrific method to get your startup’s name out there while you’re looking for capital.

However, keep in mind that crowdfunding rarely generates huge sums of beginning funds, and running a campaign can be time-consuming. Consider whether the chances for exposure through crowdfunding sites will be valuable even if the campaign does not fully fund your business before pursuing this option. If you don’t reach your crowdfunding goal, you may have to cover the balance of your startup expenditures on your own.

Consider equity crowdfunding as a middle ground between two popular startup funding options. This allows startups to raise funds by selling securities to a wide number of people. Each tiny investment might add up to a significant sum of money, but each investment also means giving up equity, so bear that in mind when considering equity crowdfunding.

 

15. Grants for Small Businesses

Grants for small businesses are a type of startup finance that requires no return, unlike debt, and no exchange of stock, unlike venture capital. They are often considered the closest thing to “free money” that you could ever get for your business.

Small business grants are usually worth looking for as a source of capital for a new business, even if they are difficult to come by. They tend to be quite industry-specific, so you’ll need to thoroughly analyze your business situation and establish your niche in order to customize your grant proposal to the grant sponsor’s objectives.

But there’s almost certainly something that pertains to you, from small business grants for women to small business grants for minorities, and so on.

 

Which Startup Funding Option Is Best for You?

Startups have a variety of funding choices. You must first gather critical information about your business before determining which finance option is best for your startup. Lenders, particularly banks and venture capitalists, are interested in knowing exactly where your business stands in terms of development and direction. Make certain you have the following details about your business:

• Time in business
• Annual revenue
• Credit score
• Business plan
• Industry

 

Then you must ask yourself, “What are my goals and needs?” If your digital business is still in the early phases of development and requires additional working capital to continue developing, you might consider equity financing options like venture capital or angel investment.

If you’re a more established business looking for money to keep up with payroll or sustain cash flow, acquiring a business loan or credit card from a bank or alternative lender makes more sense because you’ve proven that your business can last.

Final Thoughts

Although startups have fewer choices for business financing, it is still possible to secure money for a business with little or no prior experience. Make sure to check out the top 15 startup ideas we’ve listed below.

If you decide to go with one of these options for startup funding, keep the following in mind:

• Use your good personal credit to your advantage.
• Make use of your previous knowledge.
• Make a detailed business plan.
• Choose the appropriate industry.
• Demonstrate your financial investment.

You’ll be well on your way to finding the finest type of startup capital for your new business if you keep these pointers in mind