Ways to Fund a New Business Without Taking Out a Bank Loan

Grants are funds that don't need to be repaid, which makes them highly attractive — but also highly competitive. They're offered by federal and state government agencies, private foundations, and some corporations, often targeting specific groups such as women-owned businesses, veterans, or businesses in underserved communities.

The application process is usually rigorous, requiring detailed business plans, financial projections, and sometimes a demonstration of community impact. Eligibility rules vary widely, so read requirements carefully before investing time in an application. For a direct comparison of how grants stack up against loan-based funding, see our guide on business grants vs. small business loans.

Crowdfunding platforms allow entrepreneurs to raise small amounts of money from a large number of people, typically in exchange for early access to a product, a reward, or — on equity crowdfunding platforms — a small ownership stake in the company.

Reward-based crowdfunding works well for tangible consumer products where backers receive the product itself as their reward. Equity crowdfunding, regulated under federal securities law, allows non-accredited investors to participate in startup funding rounds. Either way, a successful campaign requires significant upfront marketing effort and a compelling story. Think of it as a public validation exercise as much as a fundraising one.

Angel investors are individuals — often successful entrepreneurs or executives — who invest their personal capital into early-stage companies in exchange for equity or convertible debt. They typically invest earlier than formal venture capital firms and may offer mentorship alongside funding.

Finding angel investors usually requires networking: local startup events, angel networks, pitch competitions, and professional introductions are common entry points. Be prepared with a clear pitch, a realistic valuation, and an honest assessment of your risks. Accepting angel investment means giving up a portion of ownership, so understand the implications before signing anything.

Bootstrapping means funding your business yourself — using personal savings, income from a day job, or revenue the business earns early on. It keeps you in full control with no debt and no equity dilution, but it limits how fast you can grow and puts your personal finances at risk if things don't go as planned.

Bootstrapping is particularly common in service-based businesses where startup costs are low and revenue can begin quickly. It forces disciplined financial habits from day one, which is rarely a bad thing. For a full accounting of what self-funding really costs, our article on bootstrapping trade-offs lays out both sides clearly.

Revenue-based financing (RBF) is a funding model where a business receives capital upfront and repays it as a fixed percentage of monthly revenue until a predetermined total is paid back. Unlike a traditional loan, there's no fixed monthly payment — your repayment rises and falls with your income.

This makes RBF well-suited to businesses with predictable recurring revenue, such as subscription-based services or e-commerce companies with consistent sales. It's worth noting that the total repayment amount is typically higher than the original advance, so factor that into your projections before committing. RBF providers generally look for at least a few months of revenue history, making it less accessible to pre-revenue startups.

Borrowing from people who know and believe in you can be a fast way to access early-stage capital without going through formal underwriting. However, mixing personal relationships with business finances carries real risk — for the relationship as much as the business.

If you go this route, treat it as a formal financial arrangement. Put the terms in writing, agree on repayment expectations upfront, and communicate openly if things change. Informal agreements that seem simple at the start have a way of becoming complicated when money and emotion intersect. Protecting the relationship requires the same care as protecting the business.