How Can a Startup Get Business Funding?

Starting a business usually requires money before the business has had much time to build a financial history.

That creates an obvious challenge. How do you qualify for business funding when your business is new, has limited revenue, or has not established business credit yet?

The good news is that startups may have several potential ways to access capital. The options available will depend heavily on the business owner's financial profile, whether the business is already generating revenue, how much capital is needed, and what the money will be used for.

There is no single funding strategy that works for every startup, and approval is never guaranteed. Understanding the different options can help you determine where it makes sense to start.

What Is Considered a Startup?

There is no single definition used by every lender or financing provider.

For financing purposes, however, it can be helpful to separate startups into two broad categories.

A pre-revenue startup is generally a new business that has not yet established consistent operating revenue.

An early-stage business may still be relatively new but has already begun generating revenue.

This distinction matters because many traditional business financing products rely heavily on the operating history and cash flow of the business.

A company with 12 months of consistent revenue may have very different options from a company that was formed last week.

Why Can Startup Funding Be More Difficult?

Established businesses can provide lenders with financial information showing how the company has performed over time.

A lender may be able to evaluate:

• Historical revenue
• Bank statements
• Profitability
• Cash flow
• Existing business debt
• Business credit history
• Tax returns
• Time in business

A new business may have little or none of this history.

As a result, some financing providers may place greater emphasis on the financial profile of the business owner, while others may require the business to reach certain revenue or time-in-business thresholds before it becomes eligible.

1. Business Credit Cards

Business credit cards can be one potential source of purchasing power for a startup.

Because a new business may have limited financial history, some card issuers may consider the owner's personal credit and other financial information when evaluating an application. Requirements vary by issuer.

Some business credit cards also offer introductory APR promotions to eligible applicants.

For example, a card may offer a 0% introductory APR on qualifying purchases for a specified period. After that period ends, remaining balances may become subject to the card's applicable ongoing APR.

Business owners should carefully review:

• The length of any introductory period
• The ongoing APR
• Annual and other fees
• Credit limits
• Eligible transactions
• Payment requirements
• Personal guarantee requirements
• How activity may be reported to credit bureaus

Approval and credit limits are determined by the card issuer and are not guaranteed.

2. SBA-Related Financing

The U.S. Small Business Administration supports several programs designed to increase access to capital for small businesses.

The SBA generally does not directly make most SBA business loans. Instead, eligible loans are typically made by participating lenders and partially guaranteed by the SBA.

Some SBA programs may be available to newer businesses, but qualifying can involve significant underwriting and documentation.

Depending on the program and lender, factors may include the owner's experience, creditworthiness, business plan, projected cash flow, available equity contribution, collateral, and ability to repay.

SBA financing should not be viewed as automatic startup funding. Eligibility and underwriting requirements apply.

3. Equipment Financing

If a startup needs money specifically to purchase equipment, equipment financing may be worth exploring.

The equipment being purchased may serve as collateral for the financing, depending on the transaction.

This can make equipment financing structurally different from obtaining unrestricted working capital.

Examples could include financing for certain:

• Machinery
• Commercial vehicles
• Medical equipment
• Restaurant equipment
• Construction equipment
• Manufacturing equipment

Requirements, down payments, collateral provisions, rates, and terms vary by financing provider.

4. Personal Financing Used for Business Purposes

Some entrepreneurs consider using personal financing to help launch a business.

This could include personal savings, personal credit cards, or certain personal loan products where the lender's terms permit the intended use.

This approach requires careful consideration.

Personal borrowing generally creates a personal obligation regardless of whether the business succeeds. Business owners should understand the applicable loan or card agreement and should not assume that every consumer credit product permits business use.

5. Friends and Family

Some startups are initially funded by friends or family.

While this may provide greater flexibility than institutional financing, it should still be approached professionally.

The parties should clearly understand whether the money represents:

• A loan
• An investment
• An ownership interest
• A gift
• Another arrangement

For significant transactions, appropriate legal and tax professionals can help the parties document the arrangement and understand its implications.

6. Investors

Equity financing works differently from borrowing money.

Instead of taking on debt, a startup raises money from investors in exchange for an ownership interest or other investment rights.

This can include funding from:

• Individual investors
• Angel investors
• Venture capital firms
• Strategic investors

Equity financing may be appropriate for certain businesses, particularly those pursuing significant growth, but it also generally means giving up some ownership or control.

It is not simply another type of loan.

Securities laws and other legal requirements may also apply when raising investment capital.

7. Crowdfunding

Some businesses raise startup capital through crowdfunding platforms.

The structure varies by platform.

Some campaigns involve rewards or product preorders. Others may involve investment opportunities subject to securities regulations.

Crowdfunding can also serve as a way to test market interest in a product before committing substantial capital to production.

Success is not guaranteed, and platforms may charge fees or impose specific requirements.

8. Grants

Business grants can be attractive because they generally do not operate like traditional loans that must be repaid.

However, grants are often competitive and may be restricted to particular industries, locations, business owners, research activities, or economic-development initiatives.

Business owners should be cautious of anyone promising guaranteed grant money in exchange for upfront fees.

Government agencies, local economic-development organizations, universities, nonprofit organizations, and some private companies may provide legitimate grant opportunities.

9. Revenue-Based Financing

Once a startup begins generating consistent business revenue, additional financing options may become available.

Some financing providers evaluate businesses based heavily on revenue and cash flow rather than relying exclusively on traditional credit criteria.

These products can have different repayment structures and costs than traditional bank loans.

Business owners should carefully review the total financing cost, payment frequency, repayment structure, and other contractual obligations before accepting an offer.

10. Business Lines of Credit

A business line of credit can provide revolving access to capital, but many providers require an established operating history or minimum level of business revenue.

As a startup develops consistent revenue and financial history, it may become eligible for additional line-of-credit products.

Requirements vary significantly by provider.

Does a Startup Need Revenue to Get Business Funding?

Not always.

Some financing options may rely more heavily on the financial qualifications of the business owner, collateral, or other factors.

Other financing products specifically require established business revenue.

This is why the phrase "startup funding" can be misleading.

A pre-revenue business with an owner who has strong personal credit may have certain potential options, while another startup with established monthly revenue may qualify for an entirely different group of products.

Does Personal Credit Matter for Startup Funding?

It can.

When a business has little financial history of its own, some lenders and card issuers may evaluate the business owner's personal creditworthiness.

That does not mean every business financing product requires personal credit or a personal guarantee.

Requirements vary by provider and product.

Business owners should understand whether a financing application involves a personal credit inquiry, whether that inquiry may affect their credit, and whether they will be personally responsible for repayment.

How Much Funding Can a Startup Get?

There is no universal amount.

The amount available can depend on factors such as:

• Personal credit profile
• Business revenue
• Time in business
• Business and personal income
• Existing debt
• Cash flow
• Industry
• Collateral
• Type of financing
• Intended use of funds
• The financing provider's underwriting requirements

Be cautious of advertisements suggesting that every new business can automatically receive a specific amount of funding.

An advertised maximum is not the same as the amount an individual applicant will qualify for.

What Should a Startup Prepare Before Looking for Funding?

Being organized can make the process easier.

Depending on the financing being pursued, it may be helpful to have:

• Business formation documents
• Employer Identification Number, if applicable
• Business bank account information
• Personal identification
• Business plan
• Revenue projections
• Recent bank statements, if applicable
• Tax returns, if applicable
• Information about existing debt
• Documentation showing how the funds will be used

Different financing providers require different documentation.

Start With the Purpose of the Money

Before asking, "How much funding can I get?" consider asking a different question:

How much capital does my business actually need, and what will I use it for?

A startup needing $25,000 to purchase equipment may need a different financing strategy from a startup seeking $250,000 to hire employees and operate for the next 18 months.

Understanding the use of funds can help narrow down the appropriate categories to investigate.

Be Careful With Guaranteed Funding Claims

No legitimate financing provider can guarantee that every applicant will be approved for a particular amount on particular terms without evaluating the application.

Be cautious of claims such as:

"Guaranteed $100,000 in business funding."

"No qualifications required."

"Every business gets approved."

"Guaranteed 0% funding."

Actual approvals, amounts, rates, terms, and credit limits depend on underwriting and the specific financing provider.

Should a Startup Work With a Business Funding Consultant?

Some startup owners choose to research and apply for financing themselves. Others work with a business funding consultant or broker to better understand potential options.

A consultant may help explain different financing categories, review the business owner's situation, assist with preparing information, or help identify third-party financing providers that may be appropriate to consider.

A business funding consultant is not necessarily a lender.

When financing is provided by a third party, that lender or financing provider makes its own underwriting and approval decisions.

Before working with a consultant, understand what services are being provided, what fees may apply, how the consultant is compensated, and whether information will be shared with third parties.

The Bottom Line

Startups can potentially access capital in several ways.

Depending on the business and its owners, potential sources may include business credit cards, SBA-related financing, equipment financing, personal financing where permitted, friends and family, investors, crowdfunding, grants, revenue-based financing, and business lines of credit.

A pre-revenue startup will generally face a different financing landscape than a business that has already established consistent revenue and operating history.

Instead of searching for the largest amount of funding available, start by understanding what your business needs, what financing structures may be appropriate, what they cost, and how repayment will affect your business.

Good financing should support the business plan, not replace one.

Important Disclosure

This information is provided for general educational purposes only and should not be considered a guarantee of financing or approval. Financing products, credit limits, rates, fees, repayment terms, promotional offers, eligibility requirements, and underwriting criteria vary by provider and applicant. Business funding consultants are not necessarily lenders and do not control underwriting or approval decisions made by third-party lenders, financing providers, or card issuers. Business owners should carefully review all applicable agreements and disclosures and consider consulting appropriate financial, legal, or tax professionals regarding their individual circumstances.