Raise Money for a Business: 5 Creative Funding Solutions

Written By: author image Amanda Dobanton
author image Amanda Dobanton
Amanda Dobanton - Bara Goldberg - Bara is a seasoned expert in the structured settlement and annuity field, with a successful career in structured settlement factoring. Her experience spans prominent companies such as J.G. Wentworth, Peachtree Settlement Funding, and Liberty Settlement Funding, where she managed substantial marketing campaigns. Constantly updating her knowledge, Bara is committed to providing exceptional experiences and maintaining her position as a trusted professional in the industry.
An entrepreneur drinks coffee as she reviews funding for her business

Starting or growing a business often requires a significant amount of capital. Securing the necessary business funding is one of the most important steps in turning your entrepreneurial vision into reality. Here are the various small business funding options available, including business grants, SBA loans, venture capitalists, and other options to help you obtain the capital you need for your business idea.

How Much Funding Does Your Business Need?

Before seeking small business funding, you must clearly understand how much money your business requires. 

  • Start by creating a detailed business plan that includes financial projections for the next few years. 
  • Account for all startup costs, such as equipment, inventory, rent, licenses, and initial marketing expenses. 
  • Remember to consider ongoing operating expenses like salaries, utilities, and insurance.
  • Utilize accounting software to track and project your business finances accurately.

For example, a typical breakdown of startup funding needs might look like this:

  • Equipment and supplies: $50,000
  • Inventory: $30,000
  • Rent and utilities (first 6 months): $18,000
  • Legal and professional fees: $5,000
  • Marketing and advertising: $10,000
  • Website development: $5,000
  • Working capital (first 6 months): $50,000
  • Total funding needed: $168,000

Self-Funding Options

Bootstrapping your business by utilizing personal resources like savings, retirement accounts, or funds from friends and family is often the first avenue many entrepreneurs explore for funding. These self-funding options allow you to maintain complete ownership and control over your business.

Using Personal Savings

One of the most common ways to fund a business is through personal savings. If you have money set aside, starting your business with money can be a smart choice. It allows you to maintain full control over your company and avoids the need to pay interest or give up equity.

A 2023 report by the Federal Reserve on nonemployer firms found that a significant majority of startups, both with and without employees, rely on personal savings as a primary funding source. The report revealed that 80% of startups with employees and 76% of those without employees use the founder’s personal savings to finance their ventures.

Tapping into Retirement Accounts

Another self-funding option is to tap into your retirement accounts, such as a 401(k) or IRA. While this can provide a significant amount of capital, it’s essential to understand the potential tax consequences and risks involved. Consult with a financial advisor before making any decisions.

Borrowing from Friends and Family

The same 2023 report by the Federal Reserve also discovered that more than a third (38%) of startups turn to friends and family for financial support when starting their businesses.

Asking friends and family to invest in your business can be a viable option, especially if they believe in your vision. However, it’s crucial to treat these arrangements professionally and put everything in writing to avoid potential conflicts down the road.

Pros and Cons of Self-Funding

Pros: Maintain full control, no interest payments, no equity dilution

Cons: Limited funds, personal financial risk, potential strain on relationships

Debt Financing

Taking on debt by obtaining loans, lines of credit, or other debt instruments is a common way for businesses to access capital while retaining full ownership. Various debt financing products are available from banks, online lenders, and government programs like the SBA.

Small Business Loans

Small business loans are a popular funding option for many entrepreneurs. There are several types of loans available, including:

Term Loans: These are traditional bank loans with a fixed repayment period and interest rate. SBA loan, which is a government-backed loan with favorable terms, is also type of term loan offered through the U.S. Small Business Administration (SBA).

Microloans: These are smaller loans, typically under $50,000, that are designed for startups and small businesses. They often have more relaxed qualification requirements compared to traditional bank loans. The SBA also offers a microloan program for a small business owner.

To qualify for a small business loan, you’ll generally need a solid business plan, good credit, and sometimes collateral. The application process involves submitting financial documents and waiting for the lender’s approval. Consider working with a Small Business Development Center in your area for guidance on loan applications and requirements.

Business Lines of Credit

A business line of credit functions similarly to a credit card, allowing you to borrow funds up to a predetermined limit. You only pay interest on the amount you borrow, and you can draw funds as needed. This flexibility makes lines of credit ideal for managing cash flow or covering unexpected expenses. Many banks and credit unions offer business lines of credit.

Business Credit Cards

Business credit cards can be a convenient way to fund smaller expenses and establish a credit history for your company. Many cards offer rewards programs, such as cashback or points, which can provide additional benefits. However, credit card interest rates are often higher than other financing options.

Merchant Cash Advances

A merchant cash advance (MCA) is a type of business financing that provides a lump sum of cash in exchange for a portion of your future sales. MCAs are often easier to qualify for than traditional loans but come with higher costs.

Pros and Cons of Debt Financing

Pros: Retain ownership, tax-deductible interest, predictable repayment terms

Cons: Requires good credit, interest payments, potential need for collateral

Equity Financing

Equity financing involves selling shares or ownership stakes in your company to investors in exchange for capital. This dilutes your equity, but can provide significant funding as well as valuable expertise and connections from investors.

Angel Investors

Angel investors are high-net-worth individuals who invest their own money into startups in exchange for equity. They often provide mentorship and industry connections in addition to capital. Finding angel investors typically involves networking within your local entrepreneurial community or attending pitch events. Angel investors can be a great source of early-stage funding for your business idea.

Venture Capital

Venture capitalists are professional investors who invest in high-growth startups with the potential for significant returns. They often focus on specific industries and invest in multiple rounds of funding. Securing venture capital is highly competitive and requires a strong business plan, experienced team, and proven traction.

To pitch to venture capitalists, you’ll need a compelling presentation that highlights your business’s potential, target market, competitive advantage, and financial projections. Be prepared to answer questions and provide more detailed information during due diligence.

Pros and Cons of Equity Financing

Pros: Large funding amounts, strategic partnerships, mentorship

Cons: Loss of some control, equity dilution, pressure to grow quickly


Crowdfunding enables businesses to raise smaller capital contributions from a large number of individual investors, often through online platforms. 

Crowdfunding has gained significant traction as a funding method in recent years. Data from The Crowd Data Center shows that since 2014, crowdfunding campaigns have collectively raised over $50 billion. On average, fully funded projects receive $589 from individual investors, with small businesses raising an average of nearly $201,000 through crowdfunding platforms.

Donation-Based Crowdfunding

Donation-based crowdfunding platforms, such as GoFundMe, allow individuals to contribute money to your business without expecting any financial return. This model works best for businesses with a strong social mission or community focus.

Rewards-Based Crowdfunding

With rewards-based crowdfunding, backers contribute money in exchange for a product, service, or other incentive. Platforms like Kickstarter and Indiegogo are popular for this type of funding. Successful campaigns often offer tiered rewards and have a compelling story or unique product.

Equity Crowdfunding

Equity crowdfunding allows businesses to raise capital by selling small amounts of equity to a large number of investors. Platforms like WeFunder and SeedInvest specialize in this type of funding. Keep in mind that equity crowdfunding is regulated by the SEC and requires compliance with specific rules.

Tips for a Successful Crowdfunding Campaign

  • Create a coBusiness Lines of Credit
  • Business Lines of Credit
  • mpelling video and story
  • Offer attractive rewards or incentives
  • Set a realistic funding goal
  • Promote your campaign through social media and email marketing
  • Provide regular updates to keep backers engaged

Business Grants

Small business grants are non-repayable funds awarded by government agencies, corporations, or other organizations to businesses meeting specific criteria. Securing a grant can be highly competitive but provides funding that doesn’t need to be paid back.

Federal and State Grant Programs

Governments offer various grant programs to support small businesses, particularly those in specific industries or owned by underrepresented groups. Examples include the Small Business Innovation Research (SBIR) program and the Small Business Technology Transfer (STTR) program.

For those seeking federal grant opportunities, Grants.gov is an online database that serves as a central resource for finding and applying for a small business grant. State and local economic development agencies may also offer business grants and assistance programs.

Private Grants and Startup Competitions

Many corporations, foundations, and nonprofits offer grants to startups and small businesses. These often focus on specific causes, such as sustainability or social impact. Additionally, participating in startup competitions can provide both funding and exposure for your business.

To find and apply for grants, research online databases, such as Grants.gov, and look for opportunities specific to your industry or location. Carefully review the application requirements and submit a compelling proposal that aligns with the grant program’s objectives.

Creative Funding Methods

In addition to traditional funding sources, entrepreneurs can explore creative and innovative approaches to raise capital for their businesses. These methods often leverage existing skills, assets, or communities in unique ways.

Bartering Services

If you have skills or services that another business needs, consider bartering as a way to reduce your startup costs. For example, a web design company could trade its services for office space or legal advice.

Preselling Products

Preselling involves offering your product or service to customers before it’s fully developed. This can provide upfront capital and validate market demand. Be transparent about your timeline and deliver on your promises to maintain customer trust.

Participating in Startup Incubators/Accelerators

Startup incubators and accelerators offer funding, mentorship, and resources to early-stage companies. They often provide a structured program to help businesses grow quickly. Applying to these programs can be competitive, but the support and networking opportunities can be invaluable.

How To Improve Your Business Funding Chances?

Strong Business Plan and Financial Projections

Having a well-researched and comprehensive business plan is essential when seeking funding. It should clearly articulate your business model, target market, competitive advantage, and growth strategy. Include realistic financial projections that demonstrate your understanding of revenue, expenses, and cash flow.

Experienced Team

Investors and lenders often place a significant emphasis on the strength of your team. Highlight the relevant experience, skills, and accomplishments of your key team members. If there are gaps in your team’s expertise, consider adding advisors or mentors to bolster your credibility.

Proven Business Model or Traction

Having a proven business model or demonstrating early traction can greatly improve your chances of securing funding. This could include revenue growth, customer acquisition, partnerships, or positive media coverage. Provide concrete evidence of your business’s potential for success.

Positive Credit History

Maintaining a positive credit history is crucial when seeking debt financing. Pay your bills on time, keep credit card balances low, and address any negative items on your credit report. A strong credit score can help you qualify for better loan terms and rates.

How To Choose the Right Business Funding Mix?

Aligning Funding with Business Goals and Stage

The right funding mix for your business will depend on your specific goals, stage of development, and risk tolerance. Early-stage startups may rely more on self-funding, grants, and angel investors, while growth-stage companies may seek venture capital or larger loans.

Combining Multiple Funding Sources

Many businesses use a combination of funding sources to meet their capital needs. For example, you might use a business credit card for day-to-day expenses, a term loan for equipment purchases, and equity financing for long-term growth. Diversifying your funding sources can provide greater flexibility and stability.

Getting Professional Financial and Legal Advice

Navigating the funding landscape can be complex, so it’s essential to seek professional advice. Work with a financial advisor to create a funding strategy that aligns with your business goals. Consult with a lawyer to ensure compliance with securities regulations and to protect your interests when negotiating with investors.

Real-World Funding Examples: Success Stories

✅ Airbnb

The vacation rental platform initially struggled to secure funding but eventually raised $20,000 from Y Combinator. They went on to raise over $3 billion in venture capital before going public in 2020.

✅ Uncharted Power

Founder Jessica Matthews raised over $7 million in funding for her renewable energy technology company through a combination of grants, pitch competitions, and equity investments.

✅ Canva

The graphic design startup bootstrapped for its first year before raising a $3 million seed round. They have since raised over $300 million and are valued at $15 billion.


Securing funding for your business requires careful planning, persistence, and the ability to adapt to changing circumstances. By understanding the various small business funding options available, including SBA loans, business grants, venture capital, and more, and aligning them with your business goals, you can increase your chances of success.

Remember to create a strong business plan, build a talented team, and demonstrate traction to attract investors and lenders.  

author avatar
Amanda Dobanton General Counsel
Amanda Dobanton - Bara Goldberg - Bara is a seasoned expert in the structured settlement and annuity field, with a successful career in structured settlement factoring. Her experience spans prominent companies such as J.G. Wentworth, Peachtree Settlement Funding, and Liberty Settlement Funding, where she managed substantial marketing campaigns. Constantly updating her knowledge, Bara is committed to providing exceptional experiences and maintaining her position as a trusted professional in the industry.

Amanda Dobanton

Bara Goldberg - Bara is a seasoned expert in the structured settlement and annuity field, with a successful career in structured settlement factoring. Her experience spans prominent companies such as J.G. Wentworth, Peachtree Settlement Funding, and Liberty Settlement Funding, where she managed substantial marketing campaigns. Constantly updating her knowledge, Bara is committed to providing exceptional experiences and maintaining her position as a trusted professional in the industry.