You can raise money for your business through several proven channels: bootstrapping from personal savings, borrowing through traditional or government-backed loans, selling equity to investors, running a crowdfunding campaign, or winning grants. The right path depends on how much you need, how quickly you need it, and how much ownership you’re willing to give up. Here’s how each option works in practice.
Self-Funding and Bootstrapping
Most businesses start with the founder’s own money. Personal savings, home equity lines of credit, and retirement account rollovers are the most common sources of early capital. The advantage is straightforward: you keep full ownership and avoid debt. The risk is equally clear. You’re putting personal assets on the line, and mixing personal and business finances can create legal and tax headaches down the road.
If you go this route, open a dedicated business bank account from day one and keep personal and business expenses completely separate. This protects your liability shield if you’ve formed an LLC or corporation, and it makes your books far easier to manage when tax season arrives or when you eventually seek outside funding.
SBA and Traditional Bank Loans
Small Business Administration loans are one of the most accessible forms of debt financing for businesses that qualify. The SBA doesn’t lend directly. Instead, it guarantees a portion of the loan, which makes banks more willing to approve borrowers who might not qualify on their own.
The most popular option is the SBA 7(a) loan. Interest rates are capped based on a base rate (usually the prime rate) plus a spread that depends on loan size. For loans of $350,001 or more, the cap is the base rate plus 3%. For loans of $50,000 or less, it can go up to the base rate plus 6.5%. The SBA evaluates eligibility based on what your business does, your credit history, and where the business operates. There’s no single published minimum credit score, but most lenders participating in the program look for scores in the mid-to-upper 600s and want to see that you can demonstrate the ability to repay.
Traditional bank loans and lines of credit are another option if your business has an established revenue history. Banks typically want to see at least two years of profitable operations, strong personal credit, and collateral. The application process involves detailed financial statements, tax returns, and a business plan. Expect the process to take several weeks to a few months from application to funding.
Equity Financing From Investors
Selling a stake in your company to investors lets you raise capital without taking on debt, but you give up a share of ownership and, often, some degree of control. Equity financing follows a general progression as your company grows.
Friends, Family, and Angel Investors
Pre-seed and very early funding often comes from people who know you or who invest in startups as individuals. Angel investors typically write checks ranging from $25,000 to $500,000. At this stage, investors are betting on you and your idea more than on revenue or traction. Keep these deals properly documented with clear terms, even when the investor is a relative. A simple convertible note or SAFE (Simple Agreement for Future Equity) is the standard instrument, letting you delay setting a company valuation until a later funding round.
Seed and Series A Rounds
As of late 2025, the median post-money valuation at the seed stage was $24 million, according to data from Carta, and the median Series A valuation was $78.7 million. At both stages, founders typically give up between 19% and 20% of the company per round. That dilution has held relatively steady over the past several years and represents an industry norm.
To raise a seed round, you generally need a working product or prototype, some evidence of market demand, and a clear story about how the business will scale. Series A investors expect meaningful traction: growing revenue, an expanding user base, or other proof that your business model works. Venture capital firms lead most Series A rounds and will negotiate for a board seat and protective provisions that give them a say in major decisions.
What Investors Want to See
Before any investor writes a check, they’ll conduct due diligence. At a minimum, prepare the following: three years of audited financial statements (or as many years as your business has existed), current profit-and-loss statements, tax returns, your cap table showing all existing ownership stakes, and any legal documents like articles of incorporation, operating agreements, or existing investor contracts. Institutional investors will also ask for your company’s valuation methodology, a detailed budget projecting expenses over the life of the fund or investment period, and disclosures about any past or pending litigation. Having these documents organized and ready signals that your business is professionally managed, and it speeds up a process that can otherwise drag on for months.
Crowdfunding
Crowdfunding lets you raise money from a large number of people, usually through an online platform. There are two main flavors: reward-based and equity-based.
Reward-Based Crowdfunding
Platforms like Kickstarter let you pre-sell a product or offer perks in exchange for contributions. Backers aren’t buying equity; they’re essentially placing advance orders. Kickstarter charges a 5% fee on the total funds raised, plus payment processing fees of 3% plus $0.30 per pledge. You only pay if you hit your fundraising goal. If you fall short, backers aren’t charged and you get nothing.
A successful campaign requires a compelling product, strong visuals (video is nearly essential), and a plan to drive traffic to your page. Most of your early backers will come from your own network, not from people browsing the platform. Budget time for building an audience before you launch.
Equity Crowdfunding
Under SEC Regulation Crowdfunding, businesses can sell actual equity to the public through registered platforms. This lets everyday people invest in your company, not just accredited investors. The cap is $5 million raised in a 12-month period. Platform fees vary: some charge a percentage of the raise, while others, like Fundable, charge a flat $179 per month with no percentage fee. Factor these costs into your fundraising target.
Microloans Through Crowdfunding
Kiva offers a unique model: no-interest, no-fee crowdfunded loans up to $15,000. It’s free to start and manage a campaign. The catch is the loan amount is small, so this works best for very early-stage businesses that need a modest amount of working capital rather than a large infusion.
Government Grants
Grants are free money that you don’t have to repay or give up equity for, but they’re competitive and narrowly targeted. The most well-known federal programs for small businesses are the Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs.
SBIR and STTR grants fund technology development and scientific research, not general business expenses. To qualify, your company must be a for-profit business located in and primarily operating in the United States, be more than 50% owned by U.S. citizens or permanent residents, and have no more than 500 employees including affiliates. You can’t simply apply whenever you want. You must respond to a specific solicitation published by one of the participating federal agencies, each of which sets its own research priorities.
STTR grants have an additional requirement: you must partner with a nonprofit research institution (such as a university), and the small business must perform at least 40% of the work while the research institution performs at least 30%. Nonprofits cannot receive SBIR or STTR awards directly, though they can serve as subcontractors.
Phase I awards are smaller, typically used to prove feasibility, while Phase II awards fund full development. The application process is rigorous and can take several months from submission to award. If your business isn’t in a technology or research field, these programs won’t apply to you, but other federal, state, and local grant programs exist for specific industries, demographics, and community development goals. Grants.gov is the central database for federal opportunities.
Revenue-Based Financing
If your business already generates steady revenue, you may be able to borrow against it without giving up equity or qualifying for a traditional loan. Revenue-based financing provides a lump sum in exchange for a fixed percentage of your monthly revenue until the total repayment amount is met. The effective cost is usually expressed as a factor rate (for example, 1.3x means you repay $130,000 on a $100,000 advance).
This model works well for businesses with strong, predictable revenue like subscription services or e-commerce companies. Payments flex with your income: you pay more in good months and less in slow ones. The downside is cost. The effective annual rate can be significantly higher than a traditional loan, so it’s best suited for short-term needs where you’re confident the capital will generate a quick return.
Choosing the Right Funding Path
Your decision should start with two questions: how much do you need, and what are you willing to trade for it?
- Under $15,000: Personal savings, a microloan through Kiva, or a small personal loan can cover early expenses without the complexity of outside investors or lengthy applications.
- $15,000 to $250,000: SBA loans, angel investors, crowdfunding, or a combination of these are realistic options. If you have a physical product, a Kickstarter campaign can double as both fundraising and market validation.
- $250,000 to $2 million: Angel syndicates, seed-stage venture capital, SBA 7(a) loans, and equity crowdfunding all come into play. At this level, investors will expect a clear business plan and some evidence of traction.
- $2 million and above: Venture capital is the primary path for high-growth startups. Established businesses with strong cash flow may qualify for larger commercial loans or lines of credit.
Many businesses use a combination of sources. A founder might bootstrap to build a prototype, run a Kickstarter to validate demand, then raise an angel round to scale. Each stage builds credibility for the next, and having multiple funding sources reduces your dependence on any single one.