You’ve got a killer idea for a new business, but the main hurdle standing in your way is money.

A variety of funding sources may help you get your business idea off the ground if you know where to look.

Here’s how to get funding for a business idea.

How Can I Raise Money for My Business Idea?

Here are the most popular sources of funding for a new business idea:

Get a business loan

A small business loan can provide you with funds to start your business. Debt is always risky—especially for a new business idea—but if you feel confident in your ability to get it off the ground, it may be worth taking on debt. There are many different sources of business financing, ranging from traditional financial institutions to alternative lenders. 

Use a business credit card

Haven’t thought about a business credit card as a way to finance your business? Think again. This can be a popular source of funding for a business idea that doesn’t need a huge amount of capital to launch. 

Crowdfund

New business ideas are funded every day through crowdfunding. It can be a great way to get startup business funding, if you know how to use it successfully. 

Get investors

Whether it’s friends and family, an accelerator, business incubator, angel investor, or even a venture capitalist, investment capital may be an option worth exploring. 

Let’s dig into each of these in more detail. 

How Do I Get a Business Loan?

If you have an idea for a business, but are in the pre-revenue stage, understand that getting a startup loan can be challenging. Most small business lenders and financing companies evaluate businesses based on a combination of these factors:

1. Creditworthiness: personal and/or business credit. 
2. Time in business: 2+ years in business is often preferred.
3. Revenue: lenders may have minimum income requirements.
4. Type of business: some lenders prefer certain industries and won’t lend into others.

That doesn’t mean it’s impossible to get a small business loan, but you’ll likely have to have a very solid business plan, a track record in the industry (for example, a well-regarded chef opening her own restaurant) and you may have to be willing to pledge business or personal collateral, and/or agree to a personal guarantee. 

A variety of types of loans and funding options may be available to entrepreneurs, including:

• Line of credit  
• Term loans 
• Equipment financing or leasing 
• Commercial real estate loans
• Invoice factoring or financing
• Merchant cash advances
• SBA loans
• Microloans
• Vendor terms

Most of these are targeted to more established businesses, except that some may be available to business owners just getting started. 

Microloans, for example, are usually made by nonprofit lenders and some are available to first-time business owners who may not have a perfect credit history, but are committed to starting a business that is expected to create local jobs. These funds often come with mentorship to help the business succeed. 

How Do I Get a Business Credit Card?

Business credit cards are one of the easier ways to get short-term financing for your startup, provided you have good personal credit. Most small business card issuers make the credit decision based on your personal credit and household income from all sources, not just the business. 

If you get a 0% APR credit card, you may finance start-up costs for as long as a year at 0%. (The interest rate will almost always be a much higher variable APR once that intro APR expires.) 

How Do I Get Investors for My Business Idea?

If you don’t want to borrow money, and you are willing to give up some ownership of your business, you may want to consider getting investors. These investors can come from a variety of backgrounds and experience levels. 

Friends and family

If you know people who are willing to offer financial support, you can ask them for a loan, or bring them on as investors. Either way, it’s best to have a legal agreement in place to make them more comfortable, and to make sure the relationship is spelled out clearly. If they are willing to invest but can’t provide all the money you need, another option is to have them back a crowdfunding campaign to get the ball rolling and potentially attract other investors. 

Angel investors

Angel investors typically invest in early stage companies with high potential for growth. Angel investment is typically a smaller amount of money, and investors may be just as interested in the founder as they are in the business. (The saying is that “investors bet more on the jockey than the horse.”) 

Venture capitalists

VCs also invest in founders with business ideas expected to generate a lot of revenue quickly. “They typically only invest in businesses with $100M annual revenue potential,” says investor Yun-Fang. 

Either way, finding investors often requires a significant time investment and the ability to accept a lot of rejection along the way. 

In addition to those routes, you may also want to explore the following options from the Small Business Administration:

Small Business Investment Company (SBIC)

SBICs are privately owned and managed investment funds licensed and regulated by SBA. They make equity and debt investments in qualifying small businesses by using their own capital, plus money borrowed with an SBA guarantee. 

At a minimum, your business must be a U.S. business that qualifies as a small business under SBA size standards and operates in an approved industry. These basic requirements are similar to SBA loans. 

Other requirements vary, but it’s likely that if you have a new business you will need strong business experience, a solid business plan for a business that’s expected to experience strong growth. (Some SBICs won’t invest in brand new businesses.) Check out this SBA directory of SBICs to look for potential investors. 

Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) Programs

The SBIR and STTR programs help U.S. small businesses engage in federal research and development with the potential for commercialization. While these are competitive programs, and are only available to certain types of businesses, they can be very valuable for those that qualify. And you can get help to apply through SBA resource partners. Learn more about the SBIR and STTR awards-based programs here.

What Is the Best Way to Get Business Funding?

The best way to get business funding for your business will depend on a number of factors specific to your business and funding needs. There’s no one-size-fits-all answer. These key factors include:

• Use of funds
• Amount needed
• Type of business
• Business model 
• Qualifications 
• Time frame 

For example, let’s say you need $150,000 to launch a landscaping and snow removal business. A bank loan or an SBA loan may be an option if you have good credit scores, a solid business plan, and experience in the industry. It can take a few months to get approved and funded, though, so you may need to be able to delay your full launch until you get funding. 

Angel investors and venture capital firms wouldn’t likely be interested in this type of bread and butter business unless you are taking a completely new approach that could scale rapidly. It will probably be tough to crowdfund this type of business, though not impossible if you can market it well to people in your target market who need this service. Again, that probably won’t happen quickly.

You may be able to tap a credit card to buy enough equipment and supplies to get started on a more limited basis, and then use revenues to qualify for a small business loan in the future. Or you may be able to lease equipment until you’re in a position to purchase it. 

How Do I Get Crowdfunding?

Numerous crowdfunding platforms like Kickstarter, Indiegogo, Wefunder, Kiva and many others, allow small business owners to raise money for their businesses. There are four main types of crowdfunding:

• Rewards
• Debt 
• Investment/Equity
• Donation

Each type of crowdfunding has pros and cons, but all of them will require a strong marketing campaign. Most successful crowdfunding campaigns start with a base of followers: a social media following, for example, or fans of you or your business. Friends, family and professional connections can also help you launch a successful campaign. 

How Do I Get Small Business Grants?

Small business grants are made by private businesses or foundations, as well as local, state and federal governments. Grants offer money that doesn’t have to be repaid. Grants to start a brand new business aren’t common, but that doesn’t mean they aren’t worth looking for. Here’s how to find small business grants. 

Note that US government grants are not available to start a business. 

How Do I Build My Business Credit?

When you start your business, it’s also a good idea to establish business credit. Good business credit scores can help your business get financing in the name of your business. Good business credit may also be helpful for attracting partnerships, getting supplier credit, and qualifying for the best business insurance rates. 

There are several steps to establish business credit but the main one is to get credit with companies that report to business credit bureaus, and the pay on time. A positive repayment history is the single most important factor in building business credit.

What If You Have a Business Idea but No Money?

You’ll generally have two broad options if you find yourself with a business idea but no money to make it happen: find a way to get outside funding or bootstrap it. We’ve already talked about getting money for your idea earlier, so let’s talk a little more about bootstrapping.

The term “bootstrapping” in the business sense refers to building a business with your own money and existing resources. Many small businesses were started this way. 

You scrape together money to self-fund you need to start offering your first product or service, make a few sales, then reinvest in your business from cash flow. You may not be able to pay yourself a salary for some time. 

Personal savings can jump start the process, but you may or may not have a savings account to rely on, or you may need that money to pay personal expenses while you start your business. 

While many businesses have been started this way, it can be difficult, particularly with businesses that need equipment (say a food truck or a landscaping business), businesses that need to hire employees, or even businesses that need expensive business licenses or insurance. 

One creative possibility here is to purchase an adjacent business using seller financing, then use those resources to launch your new product or service. 

The Bottom Line: Startup Funding

Getting funding for your business can be challenging whether you’re just starting out or in a growth phase. It’s essential to look at all your options and remain flexible. You may need to get money from several different sources, and those can change as you grow. 

Nav can help. Nav Prime is the only membership that helps small business owners like you accelerate your path to better funding options. Find out what your business qualifies for now, and continue to get recommendations based on your business data.