Key takeaways:

• If you need money to start your business, keep in mind that many successful businesses get creative and use a combination of personal savings, side hustle income, and strategic small business loans rather than waiting for perfect funding conditions.
• Learn how to layer multiple funding sources together—like microloans, crowdfunding, supplier credit, and business credit cards—to create a more flexible and resilient financing strategy.
• Build your business credit profile to position your business for more opportunities in the future. 

Three years ago, Phil Magic was working as a restaurant manager when he started a pressure washing business on the side. “I found a pressure washer for $500 and started by going to every gas station offering my service for free,” he said. Through that work, he discovered he wanted to focus on window cleaning but needed to learn more about the business. 

He found a mentor in Matt at Aaron Brown Window Cleaning, who agreed to teach him the ropes. He eventually saved up to buy a WaterFed system from him, and “that’s when things took off,” he says. He eventually bought a van as well.

The Reality of Startup Costs

Sometimes starting a business takes more than just a great idea and grit: it takes money, too. Whether you need startup funding for inventory, equipment, software or other costs to get your business off the ground, finding startup money is often a hurdle for new entrepreneurs.

Phil Magic has moved from one step of his business to the next without taking on debt. He’s continued to build the business organically, but cash flow can be a challenge. The last quarter of the year tends to be slow, for example. “I have my regular (monthly) clients and that keeps me afloat until January when we get super busy,” he explains. He’s also had a few clients pay slowly. “They pay, but they pay late,” he explains. 

For some businesses, that approach makes a lot of sense. For others, some capital will be required to grow or expand. And that’s where business financing comes in.

Small Business Loan and Credit Options

Here are some of the most popular types of business financing. 

Small business loans 

Small business loans like traditional bank loans and SBA-guaranteed loans offer competitive interest rates and favorable terms. However, these loan programs typically require good credit scores, collateral, and often at least two years in business. 

A few types of SBA loans are available to startups that aren’t yet earning revenue, but it’s not always easy to qualify. Don’t be discouraged if you don’t qualify immediately. This can be a goal to work toward as your business grows.

Business lines of credit

A business line of credit provides a flexible safety net for your growing business. You get approved for a specific amount, but only pay interest on what you actually use. When you repay the borrowed amount, those funds become available again, creating a revolving source of capital.

This type of financing works particularly well for working capital, including managing cash flow gaps or handling unexpected opportunities. For example, you might use a line of credit to purchase inventory for a large order, then repay it when your customer pays. Or you could tap into it to handle seasonal fluctuations in your business, drawing funds during slow periods and repaying when revenue increases.

Most business owners are already familiar with this concept through credit cards, which are essentially lines of credit. However, traditional business lines of credit often offer lower interest rates and higher credit limits than credit cards, making them a more cost-effective choice for larger expenses.

Business credit cards 

Business credit cards can provide flexible short-term financing and help build your business credit history. Some cards even offer 0% intro APR financing, giving you several months to make purchases without paying interest. Just remember you must  repay the loan before the promotional period ends.

Microloans

Microloans offer an accessible funding option for entrepreneurs who need small amounts of capital, typically under $50,000, and sometimes as little as several thousand dollars. These loans are often made by non-profit organizations and community development financial institutions (CDFIs), and are designed to provide funding to small businesses that might struggle to qualify for traditional bank loans. 

Credit score requirements may be more flexible and many microlenders also focus on supporting underserved communities, including minority-owned businesses, women entrepreneurs, and businesses in low-income areas. Microloans often come with additional benefits like business training, mentoring, and flexible repayment terms. 

Crowdfunding 

If you’ve got a great idea but not enough capital, you may want to look into crowdfunding. 

Crowdfunding platforms allow you to pre-sell products or receive backing from supporters through pledges, loans or investment funding.  

In addition to money, crowdfunding campaigns can help you build an initial customer based, or even a fan base.  

Different crowdfunding platforms serve different purposes. Reward-based platforms like Kickstarter or Indiegogo work well for physical products, letting you pre-sell inventory or offer other incentives before manufacturing. Investment crowdfunding platforms like Wefunder enable you to sell actual equity in your company to a variety of investors. 

Success in crowdfunding takes work. You’ll need a compelling story, professional presentation materials, and a strong marketing strategy to drive traffic to your campaign. 

Consider starting with email lists, social media followers, and personal networks who can support your campaign in its crucial early days. Budget for campaign expenses like video production, marketing, and fulfillment costs. Most importantly, set realistic funding goals and delivery timelines so you don’t promise more than your business can deliver. 

Government Grants and Support Programs

Government agencies, private foundations, and corporations offer small business grants. Unlike loans or investments, small business grant programs provide funding you don’t have to repay, making them an appealing option for new businesses. But there is a lot of competition, and the application process can take work especially for government grants. 

The federal government rarely provides grants directly to businesses for startup costs or expansion. Instead, most federal grants focus on specific industries or research and development initiatives. For example, the Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs provide funding for businesses developing new technologies. These grants often require your business to align with specific federal research objectives.

Your state and local governments may offer more accessible grant programs. Many states provide grants for businesses that create jobs, improve local communities, or contribute to economic development. City and county governments sometimes offer grants or low-interest loans to businesses opening in specific neighborhoods or contributing to local revitalization efforts.

When pursuing government grants or funding. 

• Start with a thorough business plan that clearly outlines how you’ll use the funds.
• Register your business on Grants.gov and SAM.gov to access federal opportunities.
• Follow application instructions exactly – even minor errors can disqualify your application.
• Pay close attention to deadlines and required documentation.
• Consider hiring a grant writer if pursuing large federal grants.
• Keep detailed records of all grant-related communications and submissions.

Help From the SBA

While the U.S. Small Business Administration doesn’t typically provide grants, it offers valuable resources and programs to help you start and grow your business. The SBA’s primary role involves:

• Guaranteeing loans through partner lenders, making it easier to qualify for financing,
• Providing free business counseling through SBA resource partners like SCORE or Small Business Development Centers,
• Offering training programs for new entrepreneurs through SBA resource partners, and
• Connecting businesses with government contracting opportunities.

Several government programs target specific demographics. The Office of Women’s Business Ownership, Minority Business Development Agency, and Veteran’s Business Outreach Centers provide specialized support, including access to capital, training, and mentorship. While these organizations may not offer direct grants, they can connect you with relevant funding opportunities.

Take advantage of free government resources while seeking funding. Reach out to your local Small Business Development Center or SCORE chapter for guidance on grant applications and business planning. These organizations may know about local funding sources and can help you prepare a strong application.

Remember that government support extends beyond direct funding. Training programs, mentorship, and business development resources can provide valuable assistance and help you avoid costly mistakes.

Self-funding and Bootstrapping

Bootstrapping your business means growing it through internal resources and revenue rather than external funding. One of the most practical approaches is starting your business as a side hustle while keeping your day job, like Phil Magic did. 

This lets you cover your living expenses while you build your customer base and test your business model. You’ll have the security of regular paychecks while reinvesting early business profits back into growth.

Many successful entrepreneurs begin with service-based offerings that require minimal upfront costs. For example, if your ultimate goal is to manufacture products, you might start by consulting in your industry or offering related services. This approach lets you build industry relationships and gain valuable market insights while generating income with little overhead.

Smart resource management plays a crucial role in bootstrapping. Consider negotiating extended payment terms with suppliers once you’ve established a track record. Look for opportunities to share resources with other small businesses, whether it’s office space, equipment, or even employees. Some businesses reduce initial costs by bartering services with other entrepreneurs; for instance, trading marketing services for accounting help.

Getting Investors

While bootstrapping and debt financing work for many businesses, some startups – particularly those with high growth potential or significant upfront costs – may be able to get investment capital. Angel investors and venture capitalists can provide substantial funding in exchange for equity (ownership) in the business.

Angel investors are typically wealthy individuals who invest their own money in early-stage companies. They often bring valuable expertise and connections along with their capital, and many prefer to invest in industries where they have personal experience. 

These investors might invest anywhere from $25,000 to several hundred thousand dollars, making them a good fit for businesses that need more capital than friends and family can provide but aren’t ready for venture capital.

Venture capital firms, on the other hand, manage large investment funds and typically invest a lot of money. They usually focus on high-growth technology companies or businesses that can scale rapidly. While venture funding can accelerate growth dramatically, it comes with high expectations for returns and often requires giving up significant control of your business.

Before approaching small business investors, you’ll need more than just a good idea. Investors expect to see a detailed business plan that includes market analysis, financial projections, and clear plans for growth. They want to understand not just what your business does, but how it will make money and what competitive advantages you offer.

Many are investing in the small business owner as much (or more) than the business idea.

Your pitch should clearly articulate your value proposition and growth potential. Be prepared to explain how you’ll use the investment funds and what return investors can expect. Practice your pitch extensively – you may only get one chance with each potential investor.

Finding and connecting with investors often requires building a strong network. Start by attending industry events, joining entrepreneur groups, and connecting with local business organizations. Many cities have angel investor networks or startup accelerators that can provide introductions to potential investors. Small business incubators and pitch competitions are another way to get visibility for your business. 

Investor relationships often develop over time and it can take a lot of work to raise money. (That’s time that might be better spent marketing your business.) While some businesses succeed raising angel funding or venture capital, most businesses won’t go this route. 

Building Credit for Future Growth

Regardless of which route you go, take time to establish business credit. Strong business credit can help open up more financing options as your business expands. Even if you don’t need financing now, having strong business credit will provide more options when you’re ready to expand.

Seek out vendors and suppliers who report payment history to business credit bureaus to help build your credit profile. Net-30 vendors, tradelines, and business credit cards that report can all be a way to build business credit.

Pay on time to build a strong business credit history. Payment history heavily influences business credit scores.

Setting Your Business Up For Success

Creating a foundation for your business requires careful planning and execution. Begin by calculating your minimum startup costs, and be cautious and realistic about what you truly need to launch. 

Research multiple funding approaches that match your current situation, remembering that finding money for your business is not all or nothing. You may need to start with your personal savings, credit and resources. Small loans may allow your business to take the next step.

Develop a business plan that includes clear funding milestones and realistic projections. Focus on generating sales as quickly as you can with minimal overhead, then reinvest those profits to continue to grow the business. 

This approach might mean growing more slowly than if you had outside business funding, but it allows you to keep control of your own business and continue to grow. 

It’s paid off for Phil’s Magic Cleaning. With persistence and perseverance, he has continued to grow his business.

How Nav Can Help

Nav can help you find financing for your business with tools and resources to help you build a financially successful business. Build, track and manage your business and personal credit, and stay on top of your cash flow.