Bootstrapping
If you want to start a business but don't have a lot of money or don't want to go to a bank, there is another option. This can work well for people with simple business ideas, like a consulting business or a small eCommerce store.If you work during the day, you can still start your business by working on it at night or on weekends. It will take some effort and commitment, but it's possible. You can even use some special tools to help your business grow, like apps that can do some of the work for you. These apps don't cost a lot of money, so you can start your business without spending too much upfront.
Friends & Family
Sometimes, people ask their friends or family to help them start a business. You might want to ask someone you know to invest in your idea so they can share in the profits. But before you ask them, you need to make a good plan for your business.You can get help from your local SBDC to make your plan and figure out how much money you need.
Some people also start a business with their family members, like their spouse, sibling, or child. This can be a good way to save money on the investment. But it can also be tricky, so watch our video about family businesses to learn more.
No matter who you partner with, it's important to make an agreement that explains who is involved, who pays for what, how much each person gets, and who makes the decisions. This can help prevent problems later on.
Business Loans
Microloans
If you want to start a business but don't have any partners or investors, you might need to get a loan. The first type of loan you can try is called a microloan. This is a small loan for $50,000 or less, and you can get it from a special group called a Community Development Financial Institution (CDFI).HELOC
There's also a new way to get money that's becoming popular. It's called a HELOC, and it uses the value of your house to give you a line of credit. But it's important to be careful with this type of loan, and only use it if you're sure your business idea will be successful.SBA
7a
If you need more money, you can try getting an SBA loan. This type of loan can give you anywhere from $50,000 to $5 million, but you will need to guarantee it yourself. You can use this loan for most things, but not for buying property. 7a loans generally have higher variable rates in the range of 5.5% - 9.5%, based on the situation. To get a 7a loan, you'll need to pay some money upfront. The amount of money you pay depends on how risky the loan is. Usually, you'll need to pay at least 10% of the loan amount, but sometimes you'll need to pay 20% to 30%.504
If you need to buy property for your business, you can try getting an SBA 504 loan. This can give you up to $20 million, but you will need to guarantee it yourself too. The loan has 3 parts: the owner, a bank, and a Certified Development Company (CDC).The CDC is the main lender and manages the loan package, which makes up 40% of the loan amount in a first mortgage. The SBA supports the second mortgage with a commercial bank loan, making up 50% of the loan amount.
The last 10% is the small business contribution and may require a 20% contribution in some cases, like if the business is a startup (under 2 years) or if the property is special.
Grants
Lots of people want to start a business without using their own money. One way to do this is by getting a grant. But grants are usually given to non-profit organizations that help people, and not to businesses just starting out. Some grants might be available for for-profit companies, but you have to meet certain requirements. To learn more, you can read our article called "The Truth about Grants."SBIR
Sometimes, small businesses can get grants for certain things. One type of grant is called a Small Business Innovative Research (SBIR) grant. This grant is for small businesses that want to do new and different research to create a product they can sell. The money for these grants comes from government agencies like DARPA or the US Army. If you think your business might be a good fit for an SBIR grant, you can find more information on the grant requests here. You can also talk to a business consultant at the SBDC for more help.STTR
Another type of grant for small businesses is the Small Business Technology Transfer (STTR) grant. This is also for research and development funds but for new technologies. STTR grants are given by specific agencies for specific areas of research. Both the SBIR and STTR grants require proposals and multiple phases to bring a specific technology to market. If your business is involved in research and development of new technologies, you can contact us here at the SBDC to see what grant funding opportunities are available for your business.Crowdfunding
Equity Crowdfunding
If you've heard of investing in a business before, you might know a little bit about equity crowdfunding. This is where people give money to a business in exchange for a promise of getting money back in the future. Once the business reaches its goals, it has to pay back the investors based on what they contributed.This type of investing is different from regular business investing because the company doesn't have to be publicly traded on the stock market and the investor doesn't need to be certified. It's also pretty easy to invest on platforms like fundable. However, there are rules that the SEC made in 2011 for equity crowdfunding.
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