Key takeaways

  • There are a variety of funding sources you can use to start a business, like crowdfunding, business grants or a startup business loan
  • Zero-debt financing helps you get funding for a business without paying interest or potentially taking on large amounts of debt
  • Debt financing helps you get funding through a business loan but may be harder for startups to obtain

It all starts with a golden business idea for a product the market hasn’t seen yet or a mission to help customers with a pressing need. Step one done.

But now you need the funding to get your idea off the ground.

To get funding to start a business, you have two main financing options: zero-debt financing and debt financing. Debt financing uses a business loan to help you get funding, while zero-debt financing uses funding from other sources, like investors.

You can start a business with as little money as $12,000, though some types of businesses cost more. Unfortunately, as current market fluctuations and inflation are making it harder for businesses to get going, you may need a combination of funding sources to give your business the runway it needs to achieve success.

What is zero-debt financing?

Zero-debt financing refers to getting funding for a business without paying any interest. Not only do you save money in interest since it’s not a business loan. But the main benefit is that you avoid the risks of taking out a loan to fund your business, and you’re free from making fixed payments that would tie up working capital.

Using zero-debt financing doesn’t mean that you shed all responsibility for turning a profit to pay for the funding. If you get zero-debt financing through investors, you may need to check in to show updated revenue numbers and even pay them part of the profits.

Types of zero-debt funding to start a business

Zero-debt financing tends to come from alternative funding sources because lenders don’t offer no-interest loans. Ways to get zero-debt financing:


Bootstrapping happens when you start a business using minimal outside resources, including no business loans, equity financing or investors. In many cases, this means you finance the business from personal resources like personal savings and home equipment.

Bootstrapping is common in the startup world. According to the Federal Reserve’s 2023 Report on Nonemployer Firms, 80 percent of startups with employees use personal savings to fund their business idea. Similarly, 76 percent of startups with no employees use personal savings.

The idea is to keep overhead minimal so the business profits as much as possible. You may rely on your effort to make the business succeed, sometimes referred to as sweat equity. Growing a business through bootstrapping may look like this:

  1. Start the business. You start a side business while still working a regular job. You may use personal savings or government or private grants to get the business running.
  2. The business becomes self-sustaining. You may invest personal savings or reinvest revenue into tools that will bring an almost immediate return on investment. You continue making sales or offering services until the business turns a profit.
  3. The owner runs the business full-time. Once the business is profitable, you may choose to quit your 9 to 5 and invest all your time in growing the business. Getting a business mentor here can help you make important decisions that speed up growth.
  4. The owner scales the business. To scale your business, you’ll need to execute strategies that boost sales or performance. You may buy new equipment, create marketing campaigns or hire employees to scale. At this point, getting a business loan can infuse your business with new capital to invest toward these strategies.
Bankrate insight

If you want to bootstrap your business, you’ll need personal savings. Ideally, this would be in addition to your emergency savings — which should cover at least six months of expenses. However, Bankrate’s annual emergency savings report found that 22 percent of U.S. adults didn’t have any emergency savings, and 30 percent had some emergency savings, but less than would cover three months’ worth of expenses, as of May 2023.


If that’s you, you may need time to build your savings account before starting your business. Once your business is up and running, don’t forget to start business emergency savings as you bring in revenue to help weather the ups and downs of owning a business.

Equity financing

Equity financing allows you to get funding from investors by selling shares of your business. While you could sell a small number of shares to many individuals, you’ll usually offer investors a large amount of equity. This gives them a high return on investment and provides you with significant capital to start your business.

Equity financing can come from:

  • Angel investors. Angel investors are individuals with high interest in your business. These are often former entrepreneurs with a track record of success to offer you in exchange for a high stake in your business.
  • Venture capital firms. Venture capitalists are financial institutions that invest in promising businesses during their early stages. These may pool resources from multiple investors or corporations, such as pension funds or insurance companies. Because VCs put significant resources into the business, they’re looking for businesses with high growth potential. These can include businesses offering a unique product or in a high-growth industry like technology companies.
  • Initial public offering (IPO). You can also decide to offer shares of your company to the public through an Initial Public Offering. This is typically done when the company is generating significant revenue because it can more confidently offer returns to shareholders. IPOs help you generate capital while spreading out the equity stake in your business to individual and institutional investors like mutual funds.

Business grants

A business grant is one of the few types of business financing that doesn’t require you to repay funds. Many business grants come from government sources at every level, from federal to local. But you may qualify through private corporations or nonprofit organizations.

The downside: you usually have to compete with other eligible businesses for the grant. The grant organization may require you to submit a detailed business plan or even showcase your business live or by video.

You also have to be patient with getting grant funds — timelines are often spread out over several months to allow many businesses to apply. You boost your chances of getting the award the more narrow the grant requirements are, such as applying for grants for minority businesses.


Crowdfunding allows you to get business funding for your business in small amounts from private investors. But it can get much more sophisticated than a simple fundraising campaign.

According to The Crowd Data Center, over $50.7 billion has been raised through crowdfunding since 2014. The average amount investors give toward fully funded projects is $589. Of these projects, small businesses raise an average of $200,848.

Here’s a look at three crowdfunding types that could help you avoid taking on debt.

Donation crowdfunding

Donation crowdfunding is crowdfunding in its simplest form. You describe to potential investors your business idea or the project you’re undertaking. You request donations to fund the project, and investors donate out of personal goodwill to see your business succeed. With this type of crowdfunding, you won’t offer any material rewards to investors.

Rewards crowdfunding

Rewards crowdfunding asks for investments in your project in exchange for some reward. The reward should match the level of investment individuals make into your business, such as swag for small donations or the product itself for midsize to large donations. Not only do you avoid paying interest with this type of crowdfunding, but you also don’t give away ownership in your business.

Equity crowdfunding

Equity crowdfunding allows you to raise funding to start a business by selling shares in your business to private investors. Investors typically buy smaller numbers of shares with equity than they would with equity financing. This option helps you retain majority ownership and control over your company while getting the financing you need. But you will need to comply with SEC regulations, such as working with an SEC-registered crowdfunding platform.

Friends and family

According to the 2023 Report on Nonemployer Firms, 38 percent of startups ask for money from friends and family to start their business. This close-knit network can provide you with financial support and encouragement to keep you motivated during your business’s early stages. You may or may not have to repay them, depending on your agreement with the person lending you money.

What is debt financing?

Debt financing is the act of using debt to raise capital for business growth initiatives, such as buying equipment or real estate or creating a new product. With debt financing, you enter into a loan agreement with a lender to repay the amount borrowed with interest or fees. Your payments usually have a time limit and can be short term like two years or long-term, like 10 years.

Rather than using your business idea to promote investment, debt financing relies on your finances and credit history. Since you don’t have business credit built up, lenders will look at your personal credit history. They typically set a minimum credit score anywhere from 600 to 670, so you’ll need to look for lenders that accept your credit level.

You may also have to wait to build up a revenue base before getting a business loan. Many lenders require at least $100,000 in revenue and six months or more in business, though some lenders require less time.

Bankrate insight

A business loan calculator can help you determine if debt financing is right for you. By entering the loan term and interest amount, you can see your estimated monthly loan payments.

Types of debt funding to start a business

As long as you qualify, you can get nearly any type of debt financing to fund your startup. But in the early stages of business, you’re most likely to qualify for:


A microloan is a term loan offered in small loan sizes, such as $50,000. Microloans are usually geared toward small businesses that don’t qualify for traditional term loans, such as startups or low-revenue businesses. They also may focus on businesses in underserved communities like minority business owners.

While many lenders offer term loans in small sizes, microlenders cap the loan amounts lower than traditional lenders. Microlenders may also provide nonfinancial support like education and mentorship to propel your business to the next level.

The Small Business Administration’s microloan program is the most widely known option offered through SBA-approved microlenders. Other examples of microlenders are Kiva, a hybrid peer-to-peer lending and crowdfunding platform, and Accion Opportunity Fund, a microlender geared toward disadvantaged businesses.

Business credit cards

Business credit cards work well for funding a startup if you’re looking to cover small expenses for a short time or keep cash flowing. The credit card issuer tailors the credit line to a limit deemed appropriate for your credit history.

The other benefit of a business credit card is that you only pay interest on the amounts you spend, and only if you don’t pay the full bill each month. If you do pay in full, you’ll get a grace period of at least 21 days from when you get the bill until the payment is due. You won’t pay any interest during this grace period, so it’s like getting a free short-term loan.

Most business credit cards require a personal FICO score of 670 or higher. But you can find cards designed for those with a fair or poor credit history. For example, the Spark 1% Classic offers cash back on everyday purchases and no annual fee, plus it’s an unsecured card that accepts fair credit.

Bankrate insight

A Bankrate credit card debt survey found that more credit cardholders are carrying a balance from month to month: 49 percent in November 2023 versus 39 percent in 2021. Carrying a balance month to month means that more cardholders are paying interest and accumulating debt.


When starting a business, managing your business debt is a must to ensure healthy finances. Otherwise, you could end up in a cycle of debt, making it difficult to scale and grow your business

Startup business loans

A startup business loan can be any loan used to fund startup expenses. Some lenders offer loans aimed directly at startups, usually short-term loans with lenient lending requirements. Other lenders lower their standard loan qualifications to welcome startup businesses.

For example, they might only require three to six months in business. But to offset the extra risk of lending to a startup, lenders may offer higher interest rates than those with a track record of success.

Bankrate insight

SBA loans can be an affordable type of debt financing for startups. So far, in fiscal year 2024, SBA-approved lenders have approved $3.4 billion in SBA 7(a) loans for startups. That’s according to data pulled from the SBA weekly lending report.

Types of startup business loans

A few types of business loans are consistently friendly to startups, but the criteria to get the loan is still different from lender to lender. Types of loans to look into:

  • Term loans. Banks and online lenders may offer startup financing through a short-term business loan. But traditional banks often have strict eligibility requirements, such as requiring a year or two in business and strong credit. You may be able to get a secured term loan more easily, which is a loan guaranteed by assets like real estate or equipment.
  • Business lines of credit. Like a credit card, a business line of credit helps small businesses reuse the same credit line as they pay back the loan. The credit limit is set to an amount that’s reasonable for that business owner to be able to repay based on their credit history. Credit limits can range anywhere from $1,000 to $250,000.
  • Equipment loans. Equipment loans give you the advantage of having a substantial asset readily available to back up the loan — the equipment you’re purchasing. Because of this, startups have a better chance of getting approved for an equipment loan.

Debt crowdfunding

Debt crowdfunding through platforms like Kiva involves getting many private individuals to invest in your business. The expectation for this type of funding is typically that you’ll repay the invested amount with interest. It’s a mesh between a crowdfunding campaign and a business loan. Since this type of crowdfunding must follow federal regulations, you’ll need to use an SEC-approved platform to crowdfund this way.

The campaign usually lasts several weeks to draw in investors. Then, you’ll make monthly payments with interest for a fixed period. Repayment terms may last from six months to several years.

Bottom line

Throughout your startup business journey, remember these funding options, as most successful businesses need several rounds of funding before they become self-sustaining. Raising funding to start a business isn’t a one-size-fits-all process, and it can get complex if you’re raising money through investors. You may need to use a combination of zero-debt and debt financing to get your business off the ground.

Frequently asked questions

  • You can get business funding even if you haven’t started building the business yet, but your options will be limited. You may need to raise capital through alternative sources like grants, angel investors or crowdfunding. If raising money through investors, you can find investors by applying to a venture capital firm, using an investor platform like AngelList or networking at small business events.
  • To fund a startup with no money, you can raise money through federal, state or local grants or through crowdfunding campaigns. You can also find small business loans that may not require annual revenue, though these are few and far between. The best thing you can do is research lenders and their requirements to determine what you may be eligible for.
  • You can raise money in various ways, and the fastest options can depend on the opportunities surrounding you. Try these funding ideas to raise money quickly:
    • Donations from family and friends
    • Crowdfunding
    • Getting local investors interested in your business idea
    • Using extra personal funds