Starting a small business is a huge undertaking – and often, an expensive one. From initial setup costs like registering your business and buying equipment, to covering day-to-day expenses like payroll and rent, it can be overwhelming trying to figure out where the money will come from.
Whether you’re starting a bakery, a freelance service, a retail shop, or anything in between, this blog will break down common small business funding options and explain some of the startup and operational costs you should prepare for.
How to Fund a Small Business
Small Business Startup Costs:
Every small business will come with its own unique set of costs, but here are some of the most common expenses that new business owners should expect:
Business registration and legal fees: You’ll likely need to register your business with your state or city and may need a business license, permits, or legal assistance. These costs can range from a few hundred to a few thousand dollars.
Equipment and inventory: Whether you’re buying tools, technology, or initial inventory, you’ll need some startup capital for purchases before you ever make a sale.
Office or retail space: If you’re not running a home-based business, you’ll need a space to operate. Rent, deposits, and utilities can add up quickly depending on your location.
Website and branding: A website is essential, even if you don’t plan to sell online. Add in logo design, domain registration, hosting fees, and maybe a marketing consultant, and this category can be another few hundred to a few thousand dollars.
Initial marketing expenses: Paid ads, printed materials, and social media campaigns can help get your business in front of customers, but they’ll cost money up front.
Safety net: Many experts recommend having 3-6 months of operating expenses saved as a cushion. This can vary depending on your industry, but most small businesses should aim for at least one month of expenses saved before launching.
Small Business Funding Options
Now that you have an idea of what it might cost to get your business off the ground, let’s talk about the different ways you can get the money to do it. Here are the most popular small business funding options:
1. Out-of-Pocket
Using your personal savings is one of the simplest ways to fund your small business. There’s no application process, no interest rates, and no repayments – just your own money invested in your dream.
That said, not everyone has a pile of cash sitting around. If you’re in the early stages of saving, consider side hustles or gig work (like delivery driving or freelancing) to build your startup fund over time.
Pros: No interest, no outside control
Cons: Limited by how much you personally have saved
2. Personal Loans
A personal loan from your bank or an online lender is a common funding option for small business owners who may not yet qualify for business loans.
Personal loans are generally easier to qualify for, especially if you have a good credit score and a steady income. However, they usually come with interest and fixed monthly payments, so make sure you’re able to cover the payments before you take one out.
Pros: Easier to get than a business loan
Cons: You’re personally liable if the business fails
3. Business Loans
A business loan is a more traditional way to fund a small business. These loans usually require a strong business plan, proof of income or revenue, and often two years of business history, so they may be difficult to get if you’re just starting out.
However, if you have an existing business or assets, a business loan or line of credit may be available through banks or SBA-backed programs.
Pros: Larger loan amounts available
Cons: Harder to qualify for as a startup
4. Business Credit Cards
Credit cards are another route many small business owners take, especially those that offer 0% introductory interest rates for the first 12 to 18 months.
This option can help you cover early costs and buy yourself time to generate revenue, but be cautious. If you don’t pay off the balance before the introductory period ends, you could be stuck with high interest.
Pros: Quick access to credit
Cons: Risk of high-interest debt if not paid off quickly
5. Crowdfunding and Fundraising
Websites like Kickstarter, GoFundMe, and Indiegogo make it possible to raise startup money from friends, family, and even strangers. In return, you might offer early product access, branded merchandise, or shout-outs.
You could also host a fundraising event or sell early memberships or pre-orders if your business model supports it.
Pros: No repayment required
Cons: Can take time and effort to run a successful campaign
6. Investors
If you know people willing to invest in your idea, you could take on investors in exchange for a share of your profits or equity in the business.
This route may make sense if your business has high growth potential and you’re okay with giving up some control.
Pros: Access to larger amounts of funding
Cons: You may give up partial ownership or profits
7. Business Grants
Grants are essentially free money, but they’re extremely competitive and often hard to get. Most grant programs require a detailed application and a solid business plan, and some are limited to specific industries, locations, or demographic groups.
There are government grants, local small business development programs, and even private companies that award grants to startups and small businesses.
Pros: You don’t have to pay it back
Cons: Time-consuming application process, not guaranteed
Final Thoughts
Starting a small business is exciting, but it comes with a lot of financial decisions. There’s no one-size-fits-all answer when it comes to small business funding options, so you may find yourself combining a few different strategies to make it work.Before you apply for a loan, open a credit card, or tap into your savings, make sure you’ve got a clear picture of your total startup costs and monthly operating expenses. Creating a solid business plan and budget will make it easier to choose the funding path that works best for you – and give your business the strongest chance of long-term success.
For a deep-dive into the expenses that went into starting my food truck business, and more insights into business funding, check out this blog.
