Fund your business (2024)

It costs money to start a business. Funding your business is one of the first — and most important — financial choices most business owners make. How you choose to fund your business could affect how you structure and run your business.


Determine how much funding you'll need

Every business has different needs, and no financial solution is one-size-fits-all. Your personal financial situation and vision for your business will shape the financial future of your business.

Once you know how muchstartup fundingyou’ll need, it’s time to figure out how you’ll get it.

Fund your business yourself with self-funding

Otherwise known as bootstrapping, self-funding lets you leverage your own financial resources to support your business. Self-funding can come in the form of turning to family and friends for capital, using your savings accounts, or even tapping into your 401(k).

With self-funding, you retain complete control over the business, but you also take on all the risk yourself. Be careful not to spend more than you can afford, and be especially careful if you choose totap into retirement accounts early. You might face expensive fees or penalties, or damage your ability to retire on time — so you should check with your plan’s administrator and a personal financial advisor first.

Get venture capital from investors

Investors can give you funding to start your business in the form of venture capital investments. Venture capital is normally offered in exchange for an ownership share and active role in the company.

Venture capital differs from traditional financing in a number of important ways. Venture capital typically:

  • Focuses high-growth companies
  • Invests capital in return for equity, rather than debt (it’s not a loan)
  • Takes higher risks in exchange for potential higher returns
  • Has a longer investment horizon than traditional financing

Almost all venture capitalists will, at a minimum, want a seat on the board of directors. So be prepared to give up some portion of both control and ownership of your company in exchange for funding.

How to get venture capital funding

There’s no guaranteed way to get venture capital, but the process generally follows a standard order of basic steps.

  1. Find an investor
    Look for individual investors — sometimes called “angel investors” — or venture capital firms. Be sure to do enough background research to know if the investor is reputable and has experience working with startup companies.
  2. Share your business plan
    The investor will review your business plan to make sure it meets their investing criteria. Most investment funds concentrate on an industry, geographic area, or stage of business development.
  3. Go through due diligence review
    The investors will look at your company’s management team, market, products and services, corporate governance documents, and financial statements.
  4. Work out the terms
    If they want to invest, the next step is to agree on a term sheet that describes the terms and conditions for the fund to make an investment.
  5. Investment
    Once you agree on a term sheet, you can get the investment! Once a venture fund has invested, it becomes actively involved in the company. Venture funds normally come in “rounds.” As the company meets milestones, further rounds of financing are made available, with adjustments in price as the company executes its plan.

Use crowdfunding to fund your business

Crowdfunding raises funds for a business from a large number of people, called crowdfunders. Crowdfunders aren’t technically investors, because they don’t receive a share of ownership in the business and don’t expect a financial return on their money.

Instead, crowdfunders expect to get a “gift” from your company as thanks for their contribution. Often, that gift is the product you plan to sell or other special perks, like meeting the business owner or getting their name in the credits. This makes crowdfunding a popular option for people who want to produce creative works (like a documentary), or a physical product (like a high-tech cooler).

Crowdfunding is also popular because it’s very low risk for business owners. Not only do you get to retain full control of your company, but if your plan fails, you’re typically under no obligation to repay your crowdfunders. Every crowdfunding platform is different, so make sure to read the fine print and understand your full financial and legal obligations.

Get a small business loan

If you want to retain complete control of your business, but don’t have enough funds to start, consider a small business loan.

To increase your chances of securing a loan, you should have abusiness plan,expense sheet, and financial projections for the next five years. These tools will give you an idea of how much you'll need to ask for, and will help the bank know they’re making a smart choice by giving you a loan.

Once you have your materials ready, contact banks and credit unions to request a loan. You’ll want to compare offers to get the best possible terms for your loan.

Use Lender Match to find lenders who offer SBA-guaranteed loans

If you have trouble getting a traditional business loan, you should look intoSBA-guaranteed loans. When a bank thinks your business is too risky to lend money to, the U.S. Small Business Administration (SBA) can agree to guarantee your loan. That way, the bank has less risk and is more willing to give your business a loan.

UseLender Matchto find lenders who offer SBA-guaranteed loans.

SBA investment programs

Small Business Investment Company (SBIC)

SBICs are privately owned and managed investment funds licensed and regulated by SBA. They use their own capital, plus funds borrowed with an SBA guarantee, to make equity and debt investments in qualifying small businesses.Learn more about SBICsto see if your business might qualify.

Small Business Innovation Research (SBIR) program

This program encourages small businesses to engage in federal research and development that has the potential for commercialization. Find out ifthe SBIR’s competitive awards-based programmakes sense for you.

Small Business Technology Transfer (STTR) program

This program offers funding opportunities in the federal innovation research and development arena. Small businesses who qualify for this program work with nonprofit research institutions in the early and intermediate stages of starting up. Find out ifthe STTR program makes sensefor your business.

Need help? Get free business counseling

Fund your business (2024)


How do I convince someone to fund my business? ›

How To Get People To Invest In Your Company
  1. Networking. ...
  2. Make a powerful pitch. ...
  3. Be confident and realistic. ...
  4. Emphasize the return on investment (ROI) ...
  5. Know your investor audience. ...
  6. Start somewhere. ...
  7. Small business loans. ...
  8. Understand your financial situation.
Dec 19, 2022

How would a grant help your business answer? ›

Grant funds are usually used to finance the investigation of a business concept, provide working capital for ramping-up a business or other purpose.

What does it mean to fund your business? ›

While business funding can happen in a variety of ways, its core definition is when funds are procured for the purpose of starting, running, and/or growing a business. There are many ways entrepreneurs can find funding for their business, from their personal savings or loans to business grants and investors.

What do you say when looking for funding? ›

What to say when you're asking for money: 5 tips to help you secure business funding
  • Describe yourself in their words. ...
  • Tell them how you will advance their agenda. ...
  • Find the perfect length for your application. ...
  • Get your numbers right. ...
  • Take feedback with open arms.
Oct 21, 2015

How to persuade someone to give you money? ›

Appear trustworthy. It is important that the other person think you are trustworthy. If they think otherwise, they could be reluctant to give you anything. Be forthcoming about your intentions, and try to earn their trust.

How do I convince people to support my business? ›

Here are steps you can take to convince someone successfully:
  1. Establish credibility. ...
  2. Know your audience. ...
  3. Listen to other viewpoints and provide compliments. ...
  4. Identify other people's motivations. ...
  5. Customize your message. ...
  6. Back up your reasoning.
Sep 27, 2023

How can I fund my business myself? ›

Self-funding can come in the form of turning to family and friends for capital, using your savings accounts, or even tapping into your 401(k). With self-funding, you retain complete control over the business, but you also take on all the risk yourself.

How do people fund businesses? ›

Business credit cards and your own wallet may be options for early-stage capital, but business loans, lines of credit and venture capital can offer larger funding amounts.

What are the three types of funds? ›

The Generally Accepted Accounting Principles (GAAP) basis classification divides funds into three fund categories: governmental, proprietary, and fiduciary.

How to write a funding statement? ›

Funding statements

The author(s) disclosed receipt of the following financial support for the research, authorship, and/or publication of this article: This work was supported by the Medical Research Council [grant number xxx]. Multiple grant numbers should be separated by commas, multiple agencies by semicolons.

How do you explain a funding request? ›

Clearly state the purpose of your funding request. Explain why you need financial support and how it aligns with your organization's goals and objectives. Be specific about the project or program you are seeking funding for.

How do you explain funding? ›

Funding is the act of providing resources to finance a need, program, or project. While this is usually in the form of money, it can also take the form of effort or time from an organization or company.

How do I ask someone for money for my business? ›

Yet, even with friends and family, as well as professional investors, you need to approach them right to be viewed as the right people:
  1. Ask for a specific amount based on a specific milestone. ...
  2. Be prepared with a formal agreement and a thank you. ...
  3. Pitch your personal investment and commitment to date.
Feb 6, 2018

How do I find someone to fund my business? ›

Here are our top 7 ways to find prospective investors for your small business:
  1. Friends and Family. After investing personal funds, the most common source of startup funding is family and friends. ...
  2. Small Business Loans. ...
  3. Small Business Grants. ...
  4. Angel Investors. ...
  5. Venture Capital Firms. ...
  6. Connections in Your Field of Work.
Feb 21, 2024

How do you approach someone for funding? ›

Remember these points when you approach an investor.
  1. Showcase yourself as a team.
  2. No one likes to invest in a one-man army.
  3. Do not seem desperate.
  4. Start your pitch with an introduction. Do not go directly to the point that you need money.
  5. Be precise.
  6. Stay to the point. ...
  7. Practice.
  8. Practice your pitch.

How to ask for business funding? ›

General guidelines for writing funding applications
  1. Always keep your project plan in mind. ...
  2. Write in plain English. ...
  3. Be specific about what you plan to do. ...
  4. Focus your application on the funder's priorities. ...
  5. Provide evidence that your work is needed.

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