14 Options for Business Capital Funding: How to Get Funding for Your Small Business

Once you’ve estimated your startup costs, operating expenses, cash flow needs, breakeven point, and reserve, you can add them up to get an idea of how much capital you need to start and run your small business.

Keep in mind that your estimates may change as your business grows, so it’s important to revisit them regularly and make adjustments as necessary.

Types of Small Business Capital Funding

Once you’ve figured out how much money you need to get your business off the ground, it’s time to decide which option for business capital funding will work best for you. You might go with one option or combine a few different ones to meet your needs.

Traditional Sources of Funding for Small Businesses

Here are the more traditional sources of funding for your small business. This is the type of business capital funding you may think of first.

1. Bank loans: Many banks will provide loans to small businesses. You will need a good credit score and a solid business plan to be approved for most of these loans.
2. Credit cards: Depending on your credit limit, you can use credit cards to get your small business off the ground. However, this should be done with caution as it may have a negative impact on your credit score if you cannot pay off the balance each month.
3. Angel investors: Angel investors are individuals who provide startup capital for small businesses in exchange for equity or part ownership in the company.
4. Venture capitalists:  Venture capitalists provide more substantial amounts of money in exchange for equity or part ownership in the company.
5. Grants: There are various government and private organizations that provide grants for small businesses. These grants usually require an application process and may come with certain strings attached.

Alternative Sources of Funding for Small Businesses

As the business world has evolved, so have the sources of business capital funding. Here are some alternative sources you can consider when looking for business capital funding:

1. Crowdfunding: There are many crowdfunding platforms that allow entrepreneurs to raise money from individuals or groups. This type of funding is typically used for early-stage companies that need capital for launch and growth.
2. Peer-to-peer lending: This type of financing allows entrepreneurs to borrow money from lenders with relatively low-interest rates.
3. Business incubators and accelerator programs: These are organizations that provide resources, mentorship, and support to startups in exchange for equity.
4. Government loan programs: The Small Business Administration (SBA) offers several loan programs designed to help small businesses grow and succeed. These include the SBA 7(a) Loan Program, SBA Microloan Program, and other specialized loan programs.
5. Online funding platforms: There are many online funding platforms that allow entrepreneurs to access capital from investors. These platforms typically have an application process and a vetting process for startups.
6. Leveraging personal assets: If you aren’t comfortable taking out a loan, one option is to use your own resources. This could include selling personal assets or taking out a home equity loan.
7. Family and friends: This is a popular option for entrepreneurs who don’t have access to other forms of financing. You should always be sure to treat these loans as professional investments with clear repayment plans so there are no surprises or misunderstandings in the future.
8. Invoice financing: If your business has a steady stream of customers who pay their invoices on time, you can use invoice financing to access funds. This type of financing allows businesses to borrow against the money they are owed in order to access funding faster.
9. Royalty-based financing: This type of financing allows businesses to borrow money in exchange for a percentage of future revenues. This can be a useful option for companies that don’t have access to traditional forms of financing.

As I mentioned, you don’t have to stick with just one form of business capital funding. You might try a combination of crowdfunding with a few grants and a small bank loan thrown in or whatever combination works best for you.

Whatever you decide, make sure you do your research and pick the best possible combination for your business.

Small Business Loans

Small business loans are a form of financing that can provide capital to entrepreneurs and small business owners. They can be used to cover a variety of expenses, such as purchasing inventory, buying equipment, expanding operations, or covering day-to-day expenses.

There are several types of small business loans available, including traditional bank loans, SBA (Small Business Administration) loans, microloans, and online loans. Each type has its own requirements, interest rates, and terms.

Traditional bank loans are typically the most difficult to qualify for, as they often require good credit and collateral. SBA loans, on the other hand, are backed by the government and offer more flexible terms and lower interest rates.

Microloans are small loans that are often offered by non-profit organizations or community lenders and are designed to help entrepreneurs get started with their businesses. Online loans are becoming increasingly popular, as they offer a quick and easy way to apply for and receive funding.

Working capital loans

Another popular type of small business loan are working capital loans. Working capital loans are a type of financing that provides businesses with the capital they need to cover day-to-day expenses, such as payroll, inventory, and other operational costs.

These loans are often used to bridge the gap between when bills are due and when revenue is generated.

Working capital loans can be a lifeline for businesses that are experiencing a temporary cash flow problem. They can help ensure that bills are paid on time and that operations continue running smoothly.

These loans are particularly useful for businesses that have seasonal or cyclical revenue patterns, as they can help businesses weather periods of low revenue.

Applying for a small business loan

When applying for a small business loan, it’s important to have a solid business plan and financial projections. Lenders want to see that you have a viable business idea and that you will be able to pay back the loan.

Having a good credit score, collateral, and a track record of successful business operations can also increase your chances of being approved for a loan. Also, make sure you carefully consider the terms of a small business loan before signing on the dotted line.

Interest rates, repayment terms, and fees can vary greatly from lender to lender, and it’s important to choose a loan that fits your specific needs and financial situation.

Our top picks for small business loans

• Small Business Administration: The SBA will help match you with lenders who offer SBA-backed funding. They also offer information and tips for you to go through so you’ll be ready to meet with lenders.
• Funding Circle: A peer-to-peer lending platform for small businesses looking for loans.
• LendingClub: An online platform for small businesses looking for loans. They offer a variety of loan options, including term loans and lines of credit.
• CircleUp: They offer equity investment and business loans to help grow your business. They also provide data and insights for your business to help with ongoing decision-making.

Finding Investors for Your Small Business

Another place to look for business capital funding is to get people willing to invest in your small business. Business investors are individuals or organizations that provide funding to startups and small businesses in exchange for a stake in the company. 

They can be individuals, such as angel investors or venture capitalists, or institutions such as banks, pension funds, or private equity firms. The level of investment can vary widely, from a few thousand dollars to millions of dollars, depending on the size and stage of the business. 

Investors typically provide financing to businesses that have high growth potential and are in need of capital to fund expansion, research and development, or other business operations. 

Our top picks for finding investors

• Gust: Start, grow, and fund your business. Gust helps you create a profile and get in contact with top Angel Investment groups and venture capitalists to help fund your business. They also have services to help plan out your funding and incorporate your business.
• MicroVentures: An equity-based crowdfunding platform that connects startups with investors. They offer a variety of services, including due diligence and investor relations support.
• EquityNet: Connect directly with accredited investors to raise business capital. The platform also helps analyze and optimize your business plan before engaging with investors.
• Seedrs: Seedrs not only helps fund your venture, but they also offer an academy of guides, tools, and resources to help you raise capital. They have the option to use crowdfunding, make connections with private investors, or sell shares in your startup.
• WeFunder: A platform for raising investment capital from individual investors.

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Crowdfunding Your Small Business

Another very popular option for business capital funding is crowdfunding. Crowdfunding is a form of fundraising that allows entrepreneurs, artists, and other individuals to raise money from a large number of people, typically through an online platform.

Crowdfunding campaigns are often used to finance a wide variety of projects, from new product development to creative works to charitable causes.

There are several types of crowdfunding, including reward-based, donation-based, and equity-based crowdfunding. In reward-based crowdfunding, backers receive a reward or perk in exchange for their contribution, such as a discount on a new product or a special edition of a book.

In donation-based crowdfunding, backers make a donation to support a cause, with no expectation of a reward. Equity-based crowdfunding is a newer form of crowdfunding that allows backers to invest in a company in exchange for an ownership stake.

Crowdfunding platforms typically take a percentage of the funds raised as a fee, and there may be other costs associated with setting up and promoting a campaign. However, crowdfunding can be an effective way to raise money for a project, particularly for those who do not have access to traditional forms of financing.

Our top picks for crowdfunding platforms

• Indiegogo: A crowdfunding platform for everything from innovative tech ideas, to artistic creations and non-profits. They also offer an education center to help teach strategies for raising more funds.
• Kickstarter: A crowdfunding platform for creative projects and ideas. A good choice for illustrations, design, film, games, music, and more.
• GoFundMe: A crowdfunding platform for personal causes and projects. A great option for fundraising for medical bills, tuition, travel expenses, and more.
• Patreon: A platform for creators to find patrons who will fund their work. This can be a great option for established artists and content creators looking to monetize their work.
• SeedInvest: A crowdfunding platform that connects startups with investors. A good option for businesses looking to raise early-stage capital.
• Fundable: A crowdfunding platform that specializes in helping businesses raise capital.
• Crowd Supply: A platform for innovative technology projects, from electronics to open-source software.
• Experiment: A platform for scientific projects and research initiatives.
• Chuffed: An international crowdfunding platform for non-profits and social causes.
• Fundly: A crowdfunding platform for individuals, non-profits, and businesses.
• StartSomeGood: Crowdfunding platform designed to help social impact projects, enterprises, and founders. Geared to projects that promote good in the world.
• Crowdcube: A UK-based crowdfunding platform designed to connect businesses with a network of investors.
• FundRazr: An all-in-one crowdfunding platform for personal fundraising, non-profits, and businesses.
• GoGetFunding: Use this platform to raise money for anything, including your business venture. They offer ongoing access to your funds, no donor fees, and access to a fundraising coach to help you raise as much money as possible.
• Ulele: A crowdfunding platform for projects that create a more diverse, sustainable, and open to all world. Ulele connects entrepreneurs with a network of investors and donors to help bring their projects to life.
• Classy: Crowdfunding platform for nonprofits.
• Seedrs: Seedrs not only helps fund your venture, but they also offer an academy of guides, tools, and resources to help you raise capital. They have the option to use crowdfunding, make connections with private investors, or sell shares in your startup.
• Mightycause: A crowdfunding platform designed to help non-profits and individuals raise money for their causes. They offer an easy setup, no fees on donations, and a wide reach of potential donors.

Small Business Grants

Another option to consider for business capital funding are small business grants. Small business grants are a form of funding that can provide financial support to small businesses and entrepreneurs.

Unlike loans, which must be repaid with interest, grants are a type of financial aid that doesn’t need to be repaid. Grants are typically awarded by governments, foundations, and other organizations to support a wide range of activities, from research and development to job creation and community development.

Small business grants are pretty much the dream way to fund your business because you don’t have to worry about paying the money back. However, the application process for grants can be highly competitive, and there is no guarantee that a business will receive funding.

Grants also typically come with specific requirements and restrictions, and businesses must be able to demonstrate that they meet the eligibility criteria.

To apply for a small business grant, businesses typically need to submit a detailed application that outlines their business plan, financial projections, and the impact that the grant funding will have on their business. Businesses may also need to provide information about their operations, management, and other key aspects of their business.

Grant applications can be time-consuming and require a significant amount of preparation, so it’s important to carefully review the application requirements and ensure that your business is a good fit for the grant program before you spend time applying for one.

Resources to apply for a small business grant

• Grants.gov: This is a government website that lists and provides access to a range of federal grant opportunities. Small business owners can search for and apply for grants on this website.
• Small Business Administration (SBA): The SBA offers a variety of grant programs to help small businesses access funding. These programs include the Small Business Innovation Research Program (SBIR), the Small Business Technology Transfer Program (STTR), and the State Trade Expansion Program (STEP), among others.
• State and local government agencies: Many state and local governments offer grant programs to support small businesses in their communities. Check with your state and local economic development agencies to find out about grant programs that may be available to you.
• Private foundations: Many private foundations offer grant programs that support small businesses and entrepreneurs. These foundations may have specific areas of focus, such as sustainability, social impact, or innovation. Research foundations that align with your business goals and mission to find grant opportunities.
• Non-profit organizations: Some non-profit organizations offer grant programs that support small businesses and entrepreneurs. For example, the National Association for the Self-Employed (NASE) offers grant programs for its members.

Self-Funding Your Small Business

If none of these options seem right for you, another option to consider is self-funding your business. Self-funding, also known as bootstrapping, is a way of financing a small business using your own personal resources rather than seeking outside financing from investors or lenders.

This can include using personal savings, credit cards, or loans from family and friends to cover startup costs and other expenses.

Self-funding your small business has several advantages. First, it allows you to maintain control over your business without having to give up equity to investors.

Second, it can help you avoid the debt and interest payments that come with borrowing from lenders. Finally, it can demonstrate to future investors and lenders that you are committed to your business and have a strong personal investment in its success.

However, self-funding also has its drawbacks. It can be difficult to come up with the necessary funds to get your business off the ground, and you may have to make sacrifices in other areas of your life to support your business.

Also, if your business requires a significant amount of capital to get started, self-funding may not be a viable option.

FAQs About Business Capital Funding

Here are some frequently asked questions about business capital funding and business financing:

What is business capital funding?

Business capital funding refers to the money a business needs to start or continue operations. It can come from various sources, including loans, grants, equity investments, or other types of financing.

What is the difference between debt and equity financing?

Debt financing involves borrowing money that must be paid back with interest, while equity financing involves giving investors ownership in the company in exchange for business funding.

What is the typical interest rate for business loans?

Interest rates for business loans can vary widely depending on factors such as the lender, the borrower’s creditworthiness, and the loan amount. Generally, rates range from a few percent to more than 20%.

What is the difference between secured and unsecured business loans?

Secured loans require collateral, such as property or inventory, while unsecured loans do not. Secured loans may have lower interest rates, but they also carry the risk of losing the collateral if the loan is not repaid.

What are the requirements for a small business loan?

Requirements for small business loans vary depending on the lender and the loan type. Generally, lenders will consider factors such as the borrower’s credit score, business plan, financial statements, and collateral.

What is a business line of credit?

A business line of credit is a type of financing that allows businesses to borrow money up to a pre-approved limit, similar to a credit card. Interest is charged only on the amount borrowed, and the borrower can repay and re-borrow funds as needed.

What is venture capital funding?

Venture capital funding involves investors providing funding to startup or early-stage companies in exchange for equity. Venture capital firms typically invest in companies with high growth potential and significant market opportunities.

How long does it take to receive funding?

The time it takes to receive funding varies depending on the type of financing and the lender. Some loans can be approved and funded within a few days, while others may take several weeks to months.

Conclusion to 14 Options for Business Capital Funding

Good luck in your business capital funding journey! With hard work and the right resources, you can get your business off the ground and on its way to success. 

Just remember that there are many options out there — so take the time to find the best fit for your business.

Check out our Start Your Business page for more resources to help you with the next steps in your business!

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