Money for Your Small Business

Where do you find money for your small business?  Good question!  I’ve listed funding sources starting with the smallest and simplest.

Personalmoney for your small business

This is my personal favorite, and if you’re asking, “what is bootstrapping?: read this quote from Small Business Trends:

bootstrapping is the act of starting a business with no money — or, at least, very little money…It means plowing back into the business the money earned from customers.

For many start-ups, this is the most realistic option.  Once you get a taste of answering to nobody but yourself, however, you might not want to go to lenders.

Personal savings
It is estimated that a third of all start-ups use “non-bank” sources of funds, and one of those is personal savings. For many start-ups, the money for your small business is your own.

You may not have any savings, and for good reason:  job loss, medical bills, poverty.  In that case, see “bootstrapping” above.

But what if you make a decent income and you’re simply living beyond your means?  If that’s the case, you are demonstrating poor money management skills.  So if you can’t manage your own money, why would anyone else lend you theirs to waste?  

Credit Cards
Be very careful about the debt you rack up.  Mishandling credit can leave you worse than broke—it can leave you in debt.

Credit card companies make billions in fees by making borrowing painless until it’s time to pay it back, and then the pain starts–big-time.  Many cards charge exorbitant fees that are buried in the fine print.  At the very least you should shop (hard) for the lowest interest rate you can find.

Retirement Savings
This is an another risky move and one I do not recommend.  It’s one thing for a thirty-something to risk a small nest egg—that person has decades to recover financially.  But if this is your first venture into self-employment, don’t risk your hard-earned savings. 

The internet is replete with stories of 50-somethings who emptied out their 401K to start a wildly successful business.  It even has its own (ironic) acronym:  ROBS (Rollovers as Business Startups).

I love a good success story as much as the next person (probably more), but what you don’t read about are the individuals who did this, failed at their business, and lost everything.  If you’re looking for money for your small business and your eye falls on thousands (or hundreds of thousands) just sitting in your 401(k), back away slowly, or limit yourself to a fraction (say, 10%) of your retirement savings as seed money.

Friends and family
If you go to family or friends, treat it like any other business loan, or risk ruining important relationships.  Sign a note that includes a repayment plan.  Don’t wreck the holidays for everyone with broken promises and resentments, and don’t borrow from anyone who can’t afford to lose it (e.g., your grandmother on a fixed income, even if you’re her favorite).

And see my comment above in personal savings—if you haven’t managed to save any money of your own to invest in your business, don’t be surprised if you loved ones decline to participate.  They may be more alive to your financial shortcomings than you are.

Crowdfunding and P2P

Peer Lending
Peer-to-peer lending sites act as matchmakers for those seeking loans and those willing to lend money.  The interest rates can be the same as a low-interest credit card, but you may find a good match here when looking for money for your small business.  Learn more about P2P at the Lend Academy’s “Start Here” page.  The two biggest sites are Lending Club and Prosper.

The number of crowdfunding sites has exploded, due in part to changes in legislation in the U.S. and abroad.  Huffington post reports that there are over 2,000 crowdfunding sites worldwide.

Kickstarter,  Indiegogo, and Go Fund Me have been joined by sites that specialize in types of investment, equity-based crowdfunding, and sites that blur the lines with peer-to-peer lending.  Read Consumer Affairs Top Ten Crowdfunding Sites for 2016.  Soho Loft News offers a list of the Top 400 Crowdfunding Sites .


Micro-lenders are non-profits that use a combination of private and government money to offer loans to populations who historically have had little access to traditional funding channels.

Kiva is a non-profit that uses a crowdfunding model to offer loans at 0% interest.  They now lend within the U.S. to startups.

Community Development Financial Institution (CDFI) is a program of the U.S. Treasury Dept. offering funding in economically distressed communities. Find a CDFI near your using the CDFI locator

Accion U.S is a is a nationwide non-profit micro-loan network.  They offer start-up loans up to $10,000, plus loans for specific types of businesses (restaurant and food, childcare, salon and spa) and certain populations (vets, the disabled, Native American, minorities, women), plus green business loans. They can also provide help with business planning and strategy, and their website contains helpful tips and videos on starting and growing a business.

Banks and Institutions

Bank of America states on their web page about starting a business:  Bank of America doesn’t have programs specifically for startups; our business financing requires you to be in business for at least 2 years.” 

That is typical of most banks–they don’t lend to start-ups.  A bank may be willing to lend you money that is collateralized by a major asset, like your home or other property.  If you can handle a refinance or second mortgage on your home, this may be an option.

Credit unions—if you are a member of a credit union, they may be more receptive to your loan application than the big banks.

SBA Loans

The SBA guarantees several types loans for general business purposes, real estate and equipment purchase, micro loans and more. Learn more here.

Angel investors or venture capitalists

These folks got rich be being smart about their money, and are unlikely to hand it over to and untried hopeful with a great idea. 

If, however, you are taking your career experience and savvy and applying it to a sound idea, and you are willing to do the work to write a business plan, put together a presentation, spend the time to locate investors, present to them, AND are willing to hand over a chunk of your business, this may be a good choice. 

But first, read, “Why 99.5% of Entrepreneurs Should Stop Wasting Time Seeking Venture Capital,” from Forbes.

Government Grants

Sorry–put that dream to rest.  This from the Small Business Administration website: 

“Looking for “free money” from the government to start your small business? Then you’ve come to the right place, because I’m here to tell you that – for the most part – there isn’t any.

Despite what you might have heard to the contrary, government grants are rarely available to small businesses.”

Are you getting the idea that getting seed money isn’t easy?  Cash is the most precious asset a business has, and the hardest to come by.  Look hard at your idea and see if you can whittle it down to the simplest, least expensive way to launch.   Then go back to the top of this list and start over.