Start-Up and Small Business Financing

Starting a business requires capital so as to run and steer the business to profitability. There are many sources of financing tailored to meet the needs of start-ups and small businesses. Business financing usually varies depending on factors such as source of funds and the type and size of business. With regards to getting equipment for your new business, accessing a small business equipment loan could be the right move to make. In some cases, the process of securing a loan can be a bit problematic for some start-ups and small business because of the unwillingness of most traditional banks to provide funds to small borrowers.

Startup funding

Here are some of the main non-banking financing options for start-ups and small businesses:

Venture capitalists – most venture capitalists are focused on funding specific growth industries. For this reason, small businesses that are making money can tap into this form of financing to expand their businesses into the next phase of growth. Besides capital financing, venture capitalist also provide crucial business insights and leads to business owners. For example, a business owner can be advised if the product or service he or she wants to sell will be a success or failure. Most venture capitalist who lend money to small businesses offer short-term to mid-term borrowing of between 3 to 5 years.

Grants – start-ups that are keen on research can apply for grants from governments and willing investors. However, grant recipients must meet all the laid down developmental and research goals. In most cases, the ideas advanced by such entities must be viable to move to the next phase of commercialization.

Online lending – there are many sources of online funding that businesses and start-ups can tap into as an alternative to borrowing from the traditional business loans. The main advantage provided by online lenders lies in speedy cash processing and advancement.

Selling Assets – if you have assets that you can offload, you can offer them for sale in order to fund your business venture. Although making this kind of decision can be difficult, a well thought out business plan and venture can give you quick returns on your investment.

Home equity loan – homeowners can acquire start-up capital through homeowners equity. The equity is calculated by deducting the value of the home from what you owe. This type of loan comes with flexible repayment terms and lower interest rates compared to what traditional banks offer. However, you must make your payments in good time to avoid having your property foreclosed.

Side business – before starting a new business, you can try out a side business as a way to fund your start-up. For example, an aspiring camping and outdoors adventure business owner can start by creating and selling travel planning apps and information manuals.


Friends and family – this alternative form of financing has several advantages including low or no interest on loans and hassle free financing. However, this form of financing requires close personal communication.

Credit cards – credit card is one of the most readily available forms of financing. Borrowers can actually make minimal payments on the amount borrowed. However, credit card financing is generally seen as a risky form of funding because of high interest that comes with default. A serious case of default can be detrimental to business owner’s credit rating and health of business.

The other sources of funding for start-ups and small business include crowdfunding and Angel investors. There are many crowdfunding websites that provide funding to small businesses and start-ups. Good examples include Indiegogo and Kickstarter. Businesses can also raise money through these sites in exchange for products or rewards. Angel investors constitutes a group of prominent companies that includes names like Yahoo and Google. The aim of these companies is to assist start-up business realize their goals from ground-up. Angel investors generally expect about 25% returns on the investment.