A business startup funding is financing meant to help with the financial needs of a new business. New business owners can also consider business credit cards, business grants, and crowdfunding. One of the biggest challenges a new small business must face is obtaining the capital necessary to support their initial growth without any business history.
Maximum Funding Amount
Cost of Working Capital
Quick access to cash
Equipment serves as collateral
Great for business owners with limited financial history
To qualify for a startup funding, you typically need to be in business for at least 6 months and have a credit score of 779 or higher. However, if your business is younger than 6 months, options will still be available. Most funders will also want to see that you have experience in a field that’s related to your small business. The most important factor in all of these small business startup financing options will be your personal credit score: The higher the score, the better your chances of qualifying for an SBA microfunding, business credit card, or even a personal funding for business.
Your eligibility for more alternative startup business funding like grants, crowdfunding, or friends and family will depend less on your credit score and more on the details of your business—like what your business model is, who your customers are, what community you operate in, and so on.
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The application depends on which method of financing you’re applying to. Here’s a short list of what to expect:
For first time business owners, starting their business and looking for the best funding option can be confusing.
Getting capital in the form of a startup business funding is riskier for any business funder. But with First Down Funding you don’t need to worry, contact us and we will show you what is the best direction to take. Below are some options available, let us know if you have any questions.
Through the SBA Microfunding Program, the Small Business Administration (SBA) funding money to intermediary nonprofit funders. These funders then provide business funding of up to $50,000 to startups and small businesses, many of them run by women, minorities, or veterans. The average SBA microfunding is $13K.
Despite the name, SBA microfunding aren’t really funding issued by the SBA. Instead, the SBA funding to intermediary, non-profit funders and financial institutions who then make the ultimate decision of which startup businesses to fund.
One of the benefits of applying to SBA microfunding as a small business startup funding is that most of the partnered intermediary funders are mission-oriented organizations that work specifically in their local communities.
Business owners with less than 6 months in business should absolutely consider getting a business credit card to help cover startup costs.
While not a traditional startup business funding, a business credit card can give you access to a credit limit that you can borrow up to when you need to cover big expenses. Just as long as you pay off your balance each month, you won’t have to worry about high const of working capital on the balances you carry over.
With 0% APR offers, make sure you can pay the balance before that cost spikes at the end of your introductory APR period. Also, you might need a certain credit score to qualify for the promotional cost in the first place.
Small business grants are a great way to raise money for your startup business. The federal government generally offers grants only to nonprofits, educational institutions, and state and local governments. Sometimes, nonprofits and state or local governments offer economic development grants directly to small businesses. But small business grants from non-profit or government organizations can be challenging to secure, as many small businesses across the country are applying to them. On top of that, some grants are reserved for certain kinds of businesses, like mission-oriented businesses, non-profits, or businesses operating in specific communities.
While small business grants aren’t a traditional replacement for startup business funding, they’re certainly worth applying to if you think you have a shot at receiving one.
When more traditional small business startup funding isn’t available to your new business, another option is to turn to friends and family to raise initial funds.
When you fund your startup with the money of friends and family, both your business’s financials and your personal relationships are on the line.
Before you get into a funding agreement, make sure that the contributors understand your business plan, what you’ll be doing with the money, and what their role will be in the funding relationship.
Small businesses can raise money with crowdfunding in exchange for rewards, future repayment, or equity in the company. Startups and more established companies can raise funds online while getting new customers. The best crowdfunding sites offer low fees, a large audience, and allow a variety of campaigns.
Crowdfunding lets you raise capital from online campaigns—typically through a dedicated crowdfunding platform, like Kickstarter or IndieGogo.
With crowdfunding, you set a specific amount of capital as a “goal” you’re trying to hit. Users on the platform can donate money to your campaign if they feel inspired to do so. Unlike equity or debt financing, you don’t have to give up ownership in your business or pay interest to these funders.
Crowdfunding is a good way to raise a small amount of capital from a large amount of people. It tends to work best for product-based businesses or those with creative, innovative ideas.