15 Best Sources of Startup Funding in 2020

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Where to Get Business Funding for Startups

The moment you decide to start a business is an exciting one. But it’s tough to maintain that momentum and enthusiasm as you set out on your search to make your startup dreams come true. One particularly tricky mundanity that can really take the wind out of your sails as you are starting a small business?

Finding startup funding.

Startup funding for small businesses is particularly elusive—as most traditional business loans require one or more years in business—but that doesn’t mean it’s impossible to get your hands on. In fact, you’ve got 15 stellar startup funding options to choose from:

  1. SBA microloans
  2. Business lines of credit
  3. Equipment financing
  4. Invoice financing
  5. Personal loans for business
  6. Friends and family loans
  7. Blue Business Plus credit card
  8. Blue Business Cash credit card
  9. Ink Business Cash credit card
  10. Ink Unlimited credit card
  11. Venture capital
  12. Angel investors
  13. Personal savings
  14. Crowdfunding
  15. Grants

In this guide, we’ll walk you through the best startup business funding sources to help you choose which of these options is the right fit for your business.

Best Startup Business Funding Sources

With a lack of business history, substantial revenue, and established credit, it can be much more difficult for startups to access funding in comparison to established businesses. This doesn’t mean, however, that you won’t be able to find startup funding for your new business.

Overall, the best sources of funding for small business startups include the following:

  • Business loans: Debt financing that gives you access to capital without diluting ownership in your business
  • Business credit cards: Allow you to leverage your personal credit history to access business credit for funding your startup
  • Debt-free funding: Alternative sources of startup funding that may be worthwhile depending on your business’s unique situation

Let’s dive into the details.

1. SBA Microloans

Originally created to make startup business funding more easily accessible to women, minorities, and veterans, the U.S. Small Business Administration’s SBA microloan program partners with community-based, nonprofit, intermediary lenders to provide small business borrowers with $500 to $50,000.

Carrying interest rates between 8% and 13%, and term lengths not to exceed six years, traditional funding with these desirable rates and terms are rarely, if ever, available to brand-new businesses outside of this SBA-subsidized program.

In addition, SBA microloan lenders are unique because the Small Business Administration intentionally chooses them to work face-to-face with the startup founders as mentors as well as lenders. (It’s one of the many advantages of SBA loans.) Within this role, microloan providers act not only as a source of funding for a small business startup, but also as counselors offering advice on business management, marketing, and finance for the ongoing success of borrowers.

This being said, however, with all of those desirable perks comes a lot of competition. And that makes the application and approval processes for the SBA microloan program not only difficult but long. Applying for an SBA loan, in general, can take time, and borrowers might find themselves jumping through what feels like unnecessary hoops to stay compliant with the program’s requirements.

2. Business Lines of Credit

If you’re looking for a more flexible source of money for your new business, consider a business line of credit. Often described as a hybrid between a credit card and a traditional business loan, a line of credit is a pool of money established by the lender with a maximum credit limit. You can draw from the line of credit for nearly any business purpose and in any amount, up to the credit limit.

The biggest advantage to a business line of credit is that you only pay interest on the amount you’ve used at any given time. So, your credit limit may be $30,000, but if you only withdraw $10,000, then you only pay interest on that $10,000 that you’re actually using.

Beyond this flexibility, here are a few other key advantages of the business line of credit as a source of startup funding:

  • Money can be withdrawn anytime and for any business purpose
  • It’s more accessible to those with less-than-perfect credit
  • Can be an excellent way to begin building business credit history as a startup
  • Provides flexibility for fluctuations in business cash flow

For these reasons, the business line of credit is a source of finance worth exploring for entrepreneurs seeking funding within that critical first year of business operations.

Keep in mind that if you apply for a business line of credit, most traditional business lenders will require applicants to have at least six months of business history under their belt: Offering startup money to brand new businesses is a risk that many banks don’t want to take.

3. Equipment Financing

If you need startup funding to purchase equipment, then consider equipment financing a top option for funding your venture. Equipment financing for startup businesses is particularly apt for your situation because of its self-secured nature. Because the equipment you purchase will act as collateral for the very funding you use to purchase it, equipment loans will be easier to qualify for, even if you don’t have much time in business.

Though many equipment lenders will have minimum requirements for time in business, a fair amount won’t have a time in business requirement to qualify for their equipment financing.  For instance, Currency Capital is one of the best equipment lenders out there, and they don’t have a minimum time in business requirement.

4. Invoice Financing

Another funding option that you’ll be able to access with little-to-no time in business is invoice financing. Through invoice financing, you’ll be able to access an advance for a portion of your business’s outstanding invoice value.

This form of startup funding will rely on your business already having at least one invoiced customer, but many invoice financing companies will require you to have very little time in business to be eligible for funding.

For example, BlueVine is an invoice financing company that will only require you to have three months of business history to be eligible for funding from them. So, if your startup fits these criteria, then invoice financing could be a top source for funding your new business.

5. Personal Loans for Business

For entrepreneurs with very strong personal credit and a new business idea that you feel really good putting your own finances on the line for, a personal loan for business might be worth considering. These options have the advantage of being simple: No hidden fees, no fancy formulas, just a basic personal loan.

Consider generally, a personal loan will tend to have lower interest rates as well as easier repayment terms than its business counterpart—and it can also be used for nearly any purpose.

That said, here is the disadvantage—and this is important: When you take one of these loans out for your business, the lender is entering into a contract with you as an individual—not with your business. This means that if bad fortune strikes and the business fails, you are still fully and personally responsible for the repayment of the outstanding balance.

6. Friends and Family

What if you don’t qualify for any of these startup business loans but you don’t want to rely solely on a business credit card for your startup business funding?

You might want to consider going to friends and family to fund your startup. If you decide to go for this business startup funding option, though, then you should be sure to systematize this traditionally less-formal form of debt.

The Minority Business Development Agency provides a helpful guide for borrowing startup money from your friends and family, so consult their advice before opting for this potentially risky form of startup funding for small business entrepreneurs.

See Your Loan Options

7. American Express Blue Business Plus Credit Card

As we mentioned briefly above, business credit cards will allow you to leverage your personal credit history to access business credit for funding your startup. Even better, many business credit cards, like the Blue Business Plus, offer a 0% intro APR period.

With the Blue Business Plus 2-month 0% intro APR period, you can pay down your startup expenses gradually without accumulating any interest over your first 12 months with the card.

As long as you pay down your startup spending within these first 12 months, the Blue Business Plus will be an interest-free solution for your startup spending. And by the time you have 12 months of business under your belt, and your intro APR period is up, you’ll barely even be a startup anymore.

That said, for your entire card membership, you’ll be able to earn rewards points with your Blue Business Plus card—you’ll earn 2x rewards points on the first $50,000 you spend each year and 1x thereafter.

8. American Express Blue Business Cash Credit Card

Another top business credit card that offers a 12-month 0% intro APR period ideal for funding a small business startup is the Blue Business Cash.

Even more, the Blue Business Cash offers cash back for your spending rather than bonus points. You’ll earn 2% back on all eligible purchases on the first $50,000 each calendar year, then 1% back on all purchases after.

At the end of the day, cash back will be much easier and more valuable to convert to startup funding than rewards points. Plus, the Blue Business Cash won’t charge you an annual fee to access all of the perks it offers that can help get your startup financing efforts off of the ground.

9. Chase Ink Cash Credit Card

Another top business credit card that offers stellar perks for startup business funding is the Chase Ink Cash. This business credit card offers a 0% intro APR period of 12 months, as well as a cash back welcome bonus of $500 once you spend $3,000 in your first three months with the card.

You’ll also earn cash back throughout your entire card membership at the following rates:

  • 5% cash back on the first $25,000 you spend annually:
    • At office supply stores
    • On internet, cable, and phone services
  • 2% cash back on the first $25,000 you spend annually:
    • At gas stations
    • At restaurants
  • 1% cash back on everything else and above those annual spending thresholds

If you want access to quick startup funding through a welcome offer, and you plan to spend a lot at office supplies store and on communication services, then the Chase Ink Business Cash should be a no-brainer source of business funding for your startup.

Credit Card

Ink Business Cash℠ Credit Card

Typical business expenses

Open Account
on Chase's secure website
  • $500 signup bonus if you spend $3K in first 3 months
  • 0% intro APR for 12 months on purchases
  • 5%, 2% or 1% cash back depending on where you spend
  • Intro APR

    -

  • Regular APR

    13.24% - 19.24% Variable

  • Annual Fee

    -

  • Minimun credit

    13.24+

10. Chase Ink Unlimited Credit Card

Finally, one last top business credit card for startup funding is the Ink Unlimited. Just like the Ink Cash, the Ink Unlimited offers a 0% intro APR of twelve months. The Ink Unlimited will also offer you a welcome bonus of $500 once you spend $3,000 within your first three months with the card.

Unlike the Ink Cash, though, the Ink Unlimited will give you an unlimited, flat-rate 1.5% cash back on every single dollar you spend with it. That means you’ll earn $1.50 for every $1 you spend with this source of startup funding.

So, if you anticipate spending on non-traditional business expenses as you start your new business, then the Ink Unlimited will likely show you more cash back returns for your spending than the Ink Cash would.

Compare the Best Startup Business Credit Cards

Credit Card

Ink Business Unlimited℠ Credit Card

Unlimited cash back and welcome bonus

Open Account
on Chase's secure website
  • $500 welcome bonus if you spend $3K in first 3 months
  • 0% intro APR on purchases for first 12 months
  • Unlimited 1.5% cash back on every purchase
  • Intro APR

    -

  • Regular APR

    13.24% - 19.24% Variable

  • Annual Fee

    -

  • Minimun credit

    13.24+

11. Venture Capital

As a startup business owner looking for sources of finance for a new business, wouldn’t it be nice to begin that journey without taking on debt?

If you’re wondering how to fund a startup without taking on interest-bearing debt, then you should look into venture capital, which is a form of equity financing, as your go-to startup funding solution. In fact, if you’re in the right industry—think, say, a tech startup—then figuring out how to get funding for a startup without debt will be pretty easy.

Especially if you have prior experience and a solid business plan, venture capitalists could be lining up at your door. VC firms will evaluate your new business based on credentials like its pre-money valuation, revenues, and team, so be ready to speak to these points before you pitch to any early-stage venture capital firms.

12. Angel Investors

Looking for angel investors is also another excellent source for startup or early business funding. Unlike venture capital financing, angel investors are generally wealthy individuals who provide working capital in exchange for ownership equity in a business.

Angel investment is typically sought out during the early growth stages of a startup business. Although angel investors usually don’t invest as much as VCs, they are still generous individuals who can potentially invest hundreds of thousands of dollars into your business.

13. Personal Savings

Have you considered how much of your own savings you’re willing to invest in your own business? If you are confident enough in your new business venture to seek funding from strangers, step up and show that confidence by investing some of your own savings in the startup.

After all, if you’re not willing to take a chance on your startup, why should anyone else—even those who habitually invest in startups—choose to fund your new business?

Plus, if you’re anticipating applying for an SBA loan at some point, definitely consider this route. The SBA likes to see that a business owner has invested personally in their business—it usually correlates with things going well when the owner has a significant personal stake in its success.

14. Crowdfunding

By taking advantage of crowdfunding platforms like Kickstarter and IndieGoGo, you might be able to fund your business by asking a large number of individuals to get involved with funding your small business startup through small investments. Each investment from a backer incrementally adds to your goal, so even the smallest contribution helps—you don’t need access to an accredited investor to fund your startup.

Setting up crowdfunding campaigns is also a great way to gain exposure for your young business while you’re seeking money for the venture.

Fair warning, however—crowdfunding does not normally generate large sums of startup capital, and maintaining a campaign can be time-consuming. Before you pursue this option, consider whether the opportunities for exposure through crowdfunding sites will be worthwhile even if the campaign doesn’t fully fund your business. If you don’t end up meeting your crowdfunding goal, you might have to end up bootstrapping the rest of your startup costs.

To find a happy medium between two top startup funding sources, you can consider equity crowdfunding. This allows startups to raise money from a large group through selling securities. Each small investment adds up to be a large chunk of capital, but each investment also means you’re saying goodbye to equity, so keep that in mind when contemplating equity crowdfunding.

15. Grants for Small Businesses

Often considered the closest thing to “free money” that you could ever obtain for your business, grants for small business are a form of startup funding that require no repayment, unlike like debt, and no trade of equity, unlike venture capital.

Although hard to find, small business grants are usually worth seeking out as a source of financing for a new business. They tend to be very industry-specific, so you’ll need to carefully research your business circumstances and identify your niche so that you can tailor your grant application to align with the grant sponsor’s goals.

But there’s likely something that applies directly to you—from small business grants for women to small business grants for minority business owners, and more.

Which Type of Startup Funding Is Right for You?

Funding options for startups vary. When figuring out which financing option is suitable for your startup, you first need to gather important information about your business. Lenders, especially banks and venture capitalists, want to see exactly where your business is at in terms of growth and direction. Make sure you have the following information about your business:

  • Time in business
  • Annual revenue
  • Credit score
  • Business plan
  • Industry

Next, you’ll have to ask yourself: What are your goals and needs? For example, if your tech startup is in its early stages of development and requires additional working capital to continue growing, you’ll probably want to look into forms of equity financing, such as venture capital or angel investment.

On the other hand, if you’re a more established business seeking funding to maintain cash flow or keep up with payroll, getting a business loan or a credit card from a bank or alternative lender will make more sense because you’ve demonstrated that your business has longevity.

The Bottom Line

Although startups certainly have more limited business financing options, finding funding for startups with little or even no business history is still possible. Be sure to explore the top 15 startup options we’ve highlighted here.

And should you decide to pursue one of these sources of startup funding, remember the following tips:

  1. Leverage good personal credit
  2. Tap into your previous experience. 
  3. Build a thorough business plan.
  4. Pick the right industry.
  5. Demonstrate your invested equity.

With these tips in mind, you’ll be well on your way to finding the best form of startup funding for your new business.

Maddie Shepherd

Maddie Shepherd is a former Fundera senior staff writer and current contributing writer for Fundera. 

Maddie has an extensive knowledge of business credit cards, accounting tools, and merchant services, but specializes in small business financing advice. She has reviewed and analyzed dozens of financial tools and providers, helping business owners make better financial decisions. 

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