How to Fund Your Small Business


Every business needs funding to get off the ground, but no two businesses have the same funding needs. Even established, successful businesses often need outside funding in order to expand their services or facilities. Again, how much and what type of fundraising is right for you depends on what you do and where you are in the process of doing it.

Startups may find it difficult to get traditional bank loans unless you, personally, have a strong credit history or have significant collateral. Established businesses with a history of profit will likely find an easier route to such loans, but they still are not a sure thing.

While grants don’t need to be repaid, they tend to have strict application requirements and the competition is stiff. Loans and outside investors can offer stable funding. Unlike most grants, however, investors and banks want something more than goodwill in return. Success means being able to repay, with interest or equity.

Here is a brief overview of different types of loans and investments to look into.


The federal Small Business Administration offers access to long-term, low-interest loans specifically for — as you might expect — small businesses. These loans are partially guaranteed by the government, so banks are at less risk if the borrower should default. To qualify, borrowers generally need to have been in business longer than two years, have $100,000 or more in annual revenue, and have a credit score of 620 or better. There are other criteria as well.

Small business term loans are what probably come to mind when you think of business funding. They pay a lump sum that you must pay back with interest. While these are most often bank loans, there are other lenders out there offering low-rate, long-term financing. As expected, the term, amount, and interest rate depend on your credit history.

Both traditional term loans and those partially guaranteed by the government are great options for established small businesses. They might not be right, however, for very small businesses and true startups that have yet to prove themselves.

  • Pro: Thousands of banks offer different options for different borrowers so it’s fairly easy to find the right fit. Also, with federal oversight, you can be sure these lenders are scrupulous.
  • Con: There’s no getting around the interest you’ll need to pay on your loan. Furthermore, some loans actually penalize you for paying them off early.


There are innovative fundraising ideas on the rise, including Kabbage. With interest-free loans, Kabbage  has extended more than $4 billion in credit to thousands of businesses. Unlike bank loans, Kabbage charges a monthly fee rather than imposing interest. Kabbage offers six-month and year-long terms, and there’s no penalty for paying back your loan early. Kabbage offers working capital lines of credit up to $250,000.

Because of its flexible nature, Kabbage may be ideal for both startup and established companies able to repay within these loans’ very short terms.

  • Pro: There’s no interest to pay.
  • Con: The loan needs to be repaid quickly.


Silly campaigns to fund cat photos or someone’s breakfast have given crowdfunding a bad name recently, but it’s still a very useful option for both fundraising and developing a rapport with potential customers. Essentially, you’re turning prospective customers into active supporters. The concept is easy: Using a reputable platform like Kickstarter, Indiegogo, Fundable, or any number of others, you set up a campaign goal. By pledging at a certain level, your funders might get some extra, such as a gift or a version of the product. If you reach the goal, you get the money — minus a percentage for the platform. If you fail to reach the goal, everyone gets their money back.

Crowdfunding is ideal for startups. It’s advertising in the form of fundraising. Larger or better-established companies should, in general, shy away from crowdfunding. It may give the impression you aren’t on good footing.

  • Pro: It couples customer outreach with raising money.
  • Con: It can come off as a little desperate, especially if you aren’t able to meet your goal.

Venture Capital

Venture capitalists are looking to invest early in emerging companies that show great potential but lack the needed startup capital. They want to get there first, get in on the ground floor. They’re the Shark Tank type. Venture capitalists realize they’re taking a risk on an unproven idea. They like it. But they aren’t crazy. You’ll need to have your idea spelled out clearly and be ready to answer some hard questions. They might also have some specific criteria you must meet. Maybe it’s changing the logo or name; maybe it’s something more substantial.

As we said, venture capitalists are ideal partners for new companies ready to sink or swim.

  • Pro: A shot of capital from these folks does wonders for your confidence and bank account, especially for businesses struggling to get going.
  • Con: That capital may come with demands, and almost certainly an ownership share.

Angel Investors

It’s a hopeful title, and for many businesses it’s the answer to a prayer. But angel investors are not fairy godmothers. Usually the funding they provide comes with partial ownership. They are looking for a big payout in a short period — usually by growing the company’s worth as quickly as possible in less than 10 years, and then selling their share for a big profit. Still, if giving up a percentage of ownership and control means remaining in business, you might see this means of raising capital as angelic. And looking at it from the investor’s point of view, they’re taking a huge risk. You’ve already proven your business isn’t a money maker or doesn’t have the ability to expand as necessary. The angel investor is betting on you, so don’t be surprised if their money comes with strings attached.

Angel investors are attracted to businesses big and small, but always with an eye for rapid growth.

  • Pro: Suddenly you have the capital to move to the next level.
  • Con: You better be prepared to move to that next level — and the one after that — quickly.


There are creative ways to raise capital yourself. Some people have the luxury (and liability) of borrowing from friends and family — but that’s probably not ideal for your relationship with them. We know a magazine publisher who spent his cash inheritance and started selling off his family’s property to keep his failing business going. Others rely on their side hustle to keep a business venture afloat — driving a taxi, waiting tables, bagging groceries. It works, but it also eats up a ton of time and energy.

When visual artist Basil Kincaid first committed to making his art his full-time job, he found a novel way of making ends meet while expanding his business. People were interested in his work but were reluctant to pay what he thought it was worth. Rather than sell cheap and undervalue his work, Kincaid kept his originals and instead sold a limited number of prints of each work. The reproductions were affordable and helped raise interest in his work. His originals now sell for the price he sets.


  • Pro: You do it yourself. You’re forced to get creative and find a way to make it work.
  • Con: Working additional jobs can take a lot of focus off your enterprise.

Getting your project funded properly requires some risk and — most likely — getting out of your comfort zone. IAW can help you meet with and learn from other professional women on this same road, as well as experts on paths you haven’t yet ventured down.