Getting funds for a business comes down to matching your stage, size, and goals to the right funding source. A pre-revenue startup with a big idea will pursue different money than an established shop looking to expand. The main paths include traditional loans, government-backed lending, grants, equity investors, crowdfunding, and newer online lending platforms. Here’s how each one works and what it takes to qualify.
SBA Loans
The U.S. Small Business Administration doesn’t lend money directly. Instead, it guarantees a portion of loans made by participating banks and credit unions, which reduces the lender’s risk and makes approval easier for borrowers who might not qualify on their own. The two most common programs are the 7(a) loan (general purpose) and the 504 loan (for real estate and major equipment).
SBA 7(a) loans can be used for working capital, equipment, inventory, or buying an existing business. Interest rates are capped based on the loan amount. For the 7(a) Working Capital Pilot program, for example, maximum rates range from the base rate plus 3% on loans above $350,000 to the base rate plus 6.5% on loans of $50,000 or less. These caps keep costs more predictable than many alternative lenders offer.
To qualify, you generally need a solid personal credit score (most lenders look for 680 or higher), a detailed business plan, and documentation showing you can repay the loan. Collateral may be required depending on the loan size. The trade-off with SBA loans is speed: the application process involves significant paperwork, and approval can take several weeks to a few months. If you need money fast, this isn’t the route. If you want favorable rates and longer repayment terms, it’s one of the best options available.
Traditional Bank Loans and Lines of Credit
A conventional business loan from a bank works like any other loan: you borrow a lump sum, pay it back with interest over a set term, and the bank evaluates your creditworthiness before approving. Banks typically want to see at least two years of business history, strong revenue, and good personal credit. If your business is brand new or your financials are thin, expect to be turned down or offered less favorable terms.
A business line of credit works differently. Instead of receiving a lump sum, you get access to a pool of funds you can draw from as needed and only pay interest on what you use. This is useful for managing cash flow gaps, covering seasonal expenses, or handling unexpected costs. Minimum annual revenue requirements vary by lender, ranging from around $50,000 to $120,000 or more depending on the institution.
Online and Fintech Lenders
If you need capital quickly or don’t meet the strict requirements of traditional banks, online lenders are worth exploring. These platforms have streamlined applications and faster decisions. Some can approve and fund your account the same day you apply, and most deliver capital within a few business days. One major lender, Bluevine, makes cash available within 12 to 24 hours of approval.
The convenience comes at a cost. Interest rates from online lenders tend to run higher than bank or SBA loans, and repayment terms are often shorter. Revenue requirements are generally lower than traditional banks, making these lenders more accessible to newer or smaller businesses. Before signing, pay close attention to the total cost of borrowing, not just the monthly payment. Some lenders quote a “factor rate” instead of an APR, which can make the true cost harder to compare.
Small Business Grants
Grants are free money you don’t have to pay back, which makes them extremely competitive. Federal grant opportunities are listed on Grants.gov, though it’s important to know that federal grants are designed for organizations and entities supporting government-funded programs and projects, not personal financial assistance. That means a solo entrepreneur looking for startup cash won’t find a direct match on the federal portal, but a business working in research, community development, clean energy, or technology innovation may find relevant programs.
Beyond federal grants, many state and local economic development agencies offer grants targeting specific industries, underserved communities, or businesses in rural areas. Private corporations and nonprofits also run grant programs. FedEx, Visa, and the Amber Grant Foundation are examples of organizations that have awarded small business grants ranging from a few thousand to $25,000 or more. The key with grants is volume: apply to many, expect to win few, and never count on grant money as your primary funding plan.
Angel Investors
Angel investors are wealthy individuals who invest their own money in early-stage companies, typically during the seed or startup phase when traditional financing isn’t available. Investment amounts range from a few thousand to several million dollars. In return, they receive an ownership stake in your company (equity) or convertible debt, which is a loan that converts into equity later.
Because angels invest early, when risk is highest, the equity they take tends to be significant relative to the dollar amount. An angel putting in $100,000 might ask for 10% to 25% of your company, depending on your valuation and negotiating leverage. Many angels also bring industry expertise, mentorship, and connections alongside their capital, which can be just as valuable as the money itself.
To attract angel investors, you’ll need a compelling pitch deck, a clear explanation of your market opportunity, and ideally some evidence of traction, whether that’s early customers, a working prototype, or revenue. Angel networks and local startup events are common places to find investors. Online platforms like AngelList also connect founders with potential backers.
Venture Capital
Venture capital firms are professional investment groups that fund companies with high growth potential. Unlike angel investors, VCs invest pooled money from institutional sources and typically get involved at Series A or later, once a company has moved past the initial startup phase and demonstrated market fit. Investments range from a few million to tens of millions of dollars.
VC firms take an equity stake in exchange for their investment. Because they enter at a later stage when company valuations are higher, the ownership percentage per dollar invested can be lower than what an angel takes at the seed stage. But VCs often negotiate for board seats, voting rights, and protective terms that give them significant influence over company decisions.
Venture capital is not a fit for most businesses. VCs are looking for companies that can scale rapidly and generate outsized returns, typically 10x or more on their investment. A local restaurant, consulting firm, or service business won’t attract VC interest regardless of profitability. If your business model involves a large addressable market, a technology-driven advantage, and the potential for rapid growth, VC funding may be realistic.
Crowdfunding
Crowdfunding lets you raise money from a large number of people, usually through an online platform. There are two main types, and they work very differently.
Reward-based crowdfunding platforms like Kickstarter and Indiegogo let you pre-sell a product or offer perks in exchange for contributions. You don’t give up any ownership in your company. This approach works best for consumer products, creative projects, or anything you can demonstrate visually. Backers are essentially pre-ordering, so you need a compelling prototype or concept and the ability to deliver on your promises.
Equity crowdfunding allows you to sell actual shares in your company to everyday investors under Regulation Crowdfunding (Reg CF). This is a legal framework that lets businesses raise up to a set annual cap from non-accredited investors through registered online portals. It’s a way to raise real capital without relying solely on wealthy individuals or institutions.
Both types of platforms charge fees on the funds you raise, so factor that into your goal. The biggest variable in crowdfunding success is your ability to market the campaign. Campaigns that go viral or tap into an existing audience tend to hit their targets. Campaigns that launch without a promotional plan rarely do.
Bootstrapping and Revenue-Based Funding
Not every business needs outside money. Bootstrapping means funding your business from personal savings, credit cards, or the revenue the business itself generates. It’s slower, but you retain full ownership and control. Many successful companies started this way, scaling gradually by reinvesting profits.
If you have an existing business generating steady revenue, revenue-based financing is another option. A lender advances you capital in exchange for a percentage of your future revenue until the advance is repaid. There’s no fixed monthly payment; instead, your repayment fluctuates with your sales. This can be easier to manage during slow months, though the total cost of borrowing is often higher than a traditional loan.
Choosing the Right Funding Source
Your best option depends on three things: how much money you need, how quickly you need it, and what you’re willing to give up. A business that needs $10,000 in working capital next week has different options than one seeking $2 million to build a product over two years. Debt (loans and lines of credit) lets you keep ownership but requires repayment regardless of how the business performs. Equity (investors and equity crowdfunding) doesn’t require repayment, but you’re permanently sharing ownership and future profits.
Many businesses combine multiple sources. You might bootstrap the first phase, win a small grant, take on an angel investor for product development, and later secure an SBA loan to expand operations. Treat fundraising as an ongoing process rather than a single event, and pursue whichever path aligns with where your business is right now.