Business owner receiving a small business grant

Finding Funding for Your Small Business

If you are a small-business owner looking to expand a company or are thinking about starting up a venture, you may be wondering where can you find the capital you need to open up shop. While it may seem difficult to get the money you need, there are lenders ready and willing to work with you.

Talk to Friends or Family Members

How small are you starting? When you first start your new business, family and friends will typically be the most flexible lenders, especially if you just need small amounts to get off the ground. In most cases, people you know will be more willing to make loans with extended repayment periods and low-interest rates. Therefore, your mom, cousin, or co-worker should be the first people you approach for business capital. This can be risky, though. If your business doesn't work out, then you're looking at defaulting on loans from family, which puts everyone in a tough position.

Look into Government Programs

Local, state, and federal government programs may be options for the small-business owner who is looking for money. Loans with a government program have lower interest rates than small business loans from banks. But why get a loan if you can get a grant? Loans have to be paid back, but grants do not. To find a small business grant, start with the U.S. Small Business Administration. Grants are much harder to get than loans and often have to be paired with another form of funding, so they're not for everyone. You should also check with your local or state governments. Some states use grants to help jumpstart job creation in a community. Whether you need a loan or a small business grant, meeting with members of your local business council and other economic leaders may give you the leads you need to find funding for your company. 

See if a Bank is Right for You

If your company has been profitable for the past two years, you may be able to obtain a loan or line of credit in your company's name. For business owners of companies that have not been profitable or operational for the past two years, you may be able to get a line of credit in your own name to fund your company. The latter can, however, be risky if your business fails; you could lose assets such as your house or a car that you put up as collateral.

Use Your Retirement Funds

In recent years, it has become possible to fund your company using 401k funds. All you have to do is rollover your money into shares of stock in your company. This allows you to become the sole or majority shareholder in your company without being hit with a tax penalty that could otherwise happen if you withdrew money from your 401k. If your business isn't successful, this might leave you without any retirement savings, so this shouldn't be your first choice.

Consider Crowdfunding

Mobilizing the people who are interested in your business idea to provide funding for your company can be a great way to raise capital for your fledgling business. In exchange for a product or some other incentive, individual investors can each donate funds to help your company grow. Crowdfunding is a great option if your business idea is going to get people excited. You're asking donors to take a leap of faith (and to give you money when they won't see a product for many months after the fact). This could also be an option if you're really passionate and you have a great idea, but maybe you're not very financially established (or even if you have bad credit).


Small-business owners have many options when it comes to finding money for their companies. Whether you decide to approach your local government, ask the crowd for cash, or get a loan from mom and dad, there is plenty of money available to help you get your venture off the ground.

Last Updated: September 26, 2017