Resources >   Business Finance  >  Business credit  >  

How to Get Funding for a Small Business if You’re Just Starting Out

Business credit

How to Get Funding for a Small Business if You’re Just Starting Out

Updated: February 20th, 2024

How to Get Funding for a Small Business if You’re Just Starting Out

When you’re starting a business, there are countless important details to sort out. Along with figuring out how to launch your products and reach potential customers, you may also be wondering how to get startup money for your small business.

For a new business, extra capital can mean the difference between success and struggle. Depending on your industry and goals, you may need funding to hire employees, purchase inventory, rent an office space, cover payroll, or refinance credit card debt.

Established businesses tend to secure funding more easily, but newer business still have plenty of funding options to access cash. Before you start shopping around, though, you need to clarify your goals.

Consider your funding options as a small business

Financing can give your business a boost, but only if you handle your funds responsibly. If you don’t have a plan for making regular payments and improving profits with your funds, you could set your business further back.

Understanding how to get funding for a small business begins with figuring out how much money you need, what you plan to use it for, and when you need it. It’s also helpful to assess your current financial situation. Checking your credit score and reviewing your financial records, including your expenses and cash flow, will give you a better idea of what types of loans you can qualify for.

Ready to get started? Here are seven of the best small business funding options:

1. How to get money for a small business with a credit card

A business credit card is a smart option for newer businesses that have a handful of regular expenses or purchases they need to pay for. Applying is easy, and you typically don’t need years of experience to qualify.

Business credit cards work like personal credit cards, though they tend to have higher spending limits, usually between $25,000 and $50,000. The average interest rate for a business credit card is around 18%, but some business credit cards have introductory deals that offer you 0% APR for the first six to 12 months. With a business credit card as your chosen small business funding option, this interest-free first year can free you up during your first year and allow you to focus on growth without racking up interest costs.

Keep in mind that you need to make your minimum payment each month; otherwise, you risk incurring higher interest rates, accumulating debt, and wrecking your credit.

2. Equipment financing

If your business needs expensive, specialized equipment to operate — think: machinery, computers, or delivery trucks — equipment financing can be a great solution. You typically don’t need to have a stellar credit score to qualify, since the equipment itself acts as collateral. Plus, you can get funds within just two days if you’re approved.

Equipment financing can take the form of a loan or lease. With a loan, you have a fixed payment schedule to repay the cost of your equipment. When you’ve repaid the cost (plus fees and interest), you own the equipment outright. With a lease, on the other hand, you pay a monthly fee to rent the equipment. The interest rates vary depending on which method you choose, but the average rate falls between 8 and 30%.

3. Invoice financing can help a small business get capital quickly

If you have regular clients and a good chunk of money in accounts receivable, invoice financing, also known as invoice factoring, can help free up your cash flow. Invoice financing companies give you a cash advance on your unpaid invoices, usually up to 85% of the total figure. Most companies charge a 3% processing fee, as well as a weekly fee, which is normally 1-3% of your invoice amount. The factoring company takes over collecting your money, and after your client pays the invoice to the company, you’ll receive the remaining 15% minus any fees.

Qualifying for invoice financing is fairly easy, but the main appeal of this particular method is its speed. If you’re searching for how to get funding for a small business quickly and easily, this is a good option. You can generally get funds within one day. Keep in mind, though, that invoice financing isn’t the most practical option if you don’t already have an established client base.

4. SBA microloan

The Small Business Administration (SBA) offers microloans to business owners who need startup funds, extra working capital, or cash to purchase supplies and equipment. The loans, which provide up to $50,000, are often granted to underrepresented business owners, like women, veterans, and minorities. The average microloan size in 2018 was just over $14,000 with an interest rate of 7.6%.

To apply, you need a detailed business plan and good personal credit. The approval process can take several weeks, and you might have to put up collateral or sign a personal guarantee, which means you may be personally responsible for the payments if your business can’t pay. The SBA also has certain rules for microloans: the repayment period cannot exceed six years and business owners are prohibited from using the money to buy property or refinance debt.

5. Friends and family are funding options to get your small business going

When your business is just getting off the ground, asking friends and family for financial assistance can be extremely helpful. The benefit of this option is that you don’t have to follow any specific rules — you can negotiate how to get capital for your small business and the terms of your arrangement based on what makes the most sense for the parties involved. Negotiation with loved ones can be tricky, though.

Certain people might be happy to lend you money without demanding anything in return, while other people may want a share of equity in your business in exchange for cash up front. This arrangement can be mutually beneficial as long as you’re comfortable giving away a percentage of your profits and/or ceding some level of control over business decisions. If, however, you’re wary of establishing a long-term financial commitment with a loved one, it’s best to steer clear of this small business funding option.  

6. Small business grants

Don’t overlook opportunities for free money when you’re figuring out how to get capital for your small business. Depending on your personal background and the industry you’re in, you may be eligible for business grants from certain organizations.

Government agencies, nonprofit groups, and corporations often give grants to help certain business owners — like women, veterans, and minorities — get their operations up and running. Organizations and companies may also award grants to business owners who work in specific sectors, like healthcare, science, engineering, or tech.

The beauty of a small business grant is that it’s free money, which means you don’t have to pay it back. However, it can be difficult to qualify. Not only is the competition steep, but the application process for small business grants can also be tedious, often requiring you to submit detailed essays and business plans.

7. Term loans

When it comes to small business funding options, term loans are some of the best. With a term loan, you borrow a fixed amount of money for a set period of time, then make regular payments with interest. Term loans are helpful if you need funds for a major project, like renovating your store or expanding your product line, and want to pay off your loan on a predictable, longer-term schedule. Most people look to banks for term loans, but this isn’t always the best option. Not only is it difficult for newer businesses to qualify for bank loans, but it can also take weeks to receive a response.

Funding Circle loans, on the other hand, are ideal for small business owners who may need help getting started. The application process takes just 10 minutes, and you can get a decision in as little as 24 hours after document submission. If you’re approved, you may be eligible to borrow for a period of six months to five years. We offer fixed interest rates, and there are no hidden fees or prepayment penalties — just a one-time origination fee if you accept the loan. So, if your business takes off in the first year, you can pay off your loan early with no financial setback.

When you’re starting a new business, financing can give you the freedom to focus on growing your operation instead of worrying about staying afloat. If you think a Funding Circle term loan could help your business thrive, learn more about what we offer or compare your options.


Affordable business financing. Crazy fast.

Funds delivered in days, not months.

dots image

Sign up for Funding Circle newsletter!

Get our latest news and information on business finance, management and growth.

Great Review: