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Eight Realistic Ways to Fund Your New Business
Is this the year you turn your creative idea into a new business? The biggest obstacle to realizing entrepreneurial dreams is raising money. Consider these eight funding sources for your small business startup.
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Small business loans
A traditional bank loan is one of the most common ways to finance a small business. To qualify for a business loan from a bank, you'll typically need the following:- Detailed business plan
- Business financial statements, tax returns, and bank statements (if applicable)
- Strong business credit score and personal credit score
- Collateral (potentially)
But even if you don't meet all of the above qualifications, you may still be able to obtain a small business loan from the U.S. Small Business Administration (SBA) if you meet its eligibility criteria.1 While SBA loans often have more appealing terms (such as lower down payments), they don't come directly from the federal government. Instead, the agency partners with banks and other lenders, backing the loans from the financial institutions and thereby reducing risk. -
Business lines of credit
If you're unable to qualify for a business loan, you might instead choose to pursue a line of credit. It is similar to a loan, but you only pay interest on the amount of money you use at any given time. Unlike a loan, which requires a specific activity such as expansion or buying inventory, you can use a line of credit for anything you choose, and it usually doesn't require collateral. -
Business credit cards
Another funding option is a business credit card. According to a 2024 PYMNTS Intelligence Report, 63% of owners attributed the success of their small business startup to using business credit cards as a funding source.2 Like lines of credit, business credit cards are easier to obtain than traditional bank loans. Business credit cards offer additional benefits, including welcome bonuses, cashback rewards, travel benefits and low- or no-interest promotions.
To qualify for a loan, you’ll typically need strong business and personal credit, a well-crafted business plan and sometimes collateral.
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Small business grants
Another way to finance your startup is small business grants, funded from a variety of sources — from local foundations to national companies. Start with a clearinghouse like Grants.gov to see if you qualify.3 You can also search online for grants specific to your location, industry and/or target market.
Remember that writing an effective grant application can take a lot of time. So, be careful where you apply and opt for the grants that you realistically believe you can win. -
Crowdfunding platforms
Platforms like Kickstarter and Indiegogo enable the public to review and make financial donations to business ideas they find compelling. Crowdfunding is popular. Kickstarter has funded more than 658,600 projects totaling nearly $8 billion.4
The most successful crowdfunding campaigns are those with high page views, which might require significant marketing effort. To help fuel interest, some small business owners offer rewards for investing, such as discounts or even a free item. Be sure to calculate how that fulfillment piece could impact your time and revenue. -
Angel investors
Individuals and groups are willing to provide entrepreneurs with startup funding in exchange for a share of the business. You can often find these “angel investors” via local networking groups, industry trade groups or the local chamber of commerce. Some groups also hold “pitch fests" where you can share your idea with multiple potential investors at once, similar to a “Shark Tank" competition on a smaller scale.
If you receive an offer, find out how involved your investor wants to be before you accept their funding. For example, the investor may ask for an equity stake in your company as a “silent” partner or expect to provide input on your business decisions. Decide if these terms are acceptable to you. Remember that angel investors are concerned with risk and reward. The more risk they undertake, the greater the expected reward. -
Self-funding
The U.S. Chamber of Commerce revealed that 78% of small business owners use their own money to fund their ventures.5 Aspiring entrepreneurs can self-fund — or “bootstrap” — their businesses in several ways. You could withdraw savings or cash in a certificate of deposit, for instance. Or you might acquire a second mortgage or sell a second home, then funnel the proceeds into your company. Whatever you decide, it’s best to save at least six months of personal living expenses before launching a full-time business. -
Loans from friends and family
Those who are close to you already trust and believe in you and may be willing to invest in your small business. However, carefully consider whether you are comfortable accepting donations or loans from family or friends.
If you decide to raise funds this way, be upfront about the risks. Be sure to implement a signed agreement — prior to accepting the capital — that details the repayment terms and reimbursement period, as well as contingencies if the business doesn’t proceed as planned.
Launching your own business is a dream come true. If you’re ready to take the next step, we can help. Synovus is an SBA Preferred Lender that is committed to helping small business owners achieve their goals. For assistance evaluating funding options, contact a Synovus Business Banker, call 1-888-SYNOVUS (1-888-796-6887) or stop by one of our local branches.
Important disclosure information
This content is general in nature and does not constitute legal, tax, accounting, financial or investment advice. You are encouraged to consult with competent legal, tax, accounting, financial or investment professionals based on your specific circumstances. We do not make any warranties as to accuracy or completeness of this information, do not endorse any third-party companies, products, or services described here, and take no liability for your use of this information. Diversification does not ensure against loss.
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