Getting Money to Start a Business

Many people ask how to apply for grants to get money to start a business. Starting a business can be expensive and it's understandable that a new business owner would look for "free money."

If you're thinking this sounds too good to be true, you're mostly right. There is an extremely limited number of grants available to for-profit businesses. The best list I've found is Nerd Wallet's Small-Business Grants: Where to Find Free Money, opens a new window.

So what's an entrepreneur to do? There are four main ways to get money to start your business: bootstrap it; friends & family loans; bank loans and private investors.

Bootstrap It

Admittedly, this doesn't involve getting more money. Instead, you try to stretch every dollar. This might look like:

  • Buying a cheap desk on Craigslist or at a used office furniture store
  • Finding free (and cheap) ways to market your business
  • Asking your friendly Business Librarian for help identifying your target market—to request an appointment, go to the Business Help page

Here are a few books to get you started.

Millionaire Marketing on A Shoestring Budget, opens a new window

Start Your Business on a Ramen Noodle Budget, opens a new window

Friends, Family and Crowdfunding

You can ask family or friends for a loan or a gift of money. Or you could ask them to be the first to buy your product or service. For tips on how to do this, I suggest the article Asking Friends and Family for Money: Keep Them Too!, opens a new window

Another extremely popular option is to use a crowdfunding site.  There are a few types of crowdfunding sites now, which may make this a more viable option:

  • Rewards-Based Crowdfunding (for example Kickstarter and Indegogo) - While these sites are well-known options, they often require a business to spend money on a slick video and develop compelling rewards. 
  • Equity-Based Crowdfunding (i.e. MainVest and Republic) - These sites allow a business owner to raise a larger amount of funds and identify potential long-term investors but they require giving away a portion of the company. This type of crowdfunding also introduces more complex reporting requirements.
  • Debt-Based Crowdfunding (i.e. Prosper) - These sites allow a business owner to borrow money from a group of people and pay back the money on a schedule. Like the majority of loans, there are also interest charges.

To learn more about these options, check out these resources:

Your First Kickstarter Campaign, opens a new window

Equity Crowdfunding, opens a new window

Bank Loans

If you decide to take out a loan from a bank or other lender, you'll want to select a trustworthy institution that will give you the best possible interest rate. One option is to consider lenders who partner with the government agency the Small Business Administration (SBA). While the SBA doesn't lend the money, they set the guidelines and guarantee the loans, opens a new window

To learn more about these options, refer to the Financing Options, opens a new window section of the Colorado Small Business Resource Book, opens a new window. For additional information on how to get a loan, check out these great books.

Approved, opens a new window

How to Borrow: The Comprehensive Guide on Finances and Loans, Learn Everything You Need to Know a, opens a new window

Private Investors

Also known as angel investors or seed investors, these are private individuals with a high net worth who have decided to invest in startups. But it's not all magic. If you want to get funds from an angel investor or a venture capital firm, you will typically need to:

  • Have a well-written and comprehensively researched business plan
  • Create a pitch deck, which is a set of slides that explain why your startup is a good investment
  • Develop a plan to have your business either have a very high return on investment OR have a strategy for your business to be acquired by another company for a large amount of money

If this seems like the right fit for your startup, there are many resources and books to help you get started. Here's a brief list:

Mastering the VC Game, opens a new window

The Art of Startup Fundraising, opens a new window