5 ways to fund a small business

If you want to learn more, please visit our website.

Launching a small business requires ambition, persistence, confidence &#; and money. The amount of cash you need to get up and running varies wildly depending on the nature of your business. A small e-commerce store might only require a few hundred dollars to launch, while opening a cafe would cost considerably more. No matter how much you need, these methods can help you meet your fundraising goal.

5 ways to fund a small business

• Small business loans
• Business credit cards
• Grants
• Bootstrapping
• Crowdfunding
• FAQs

Compare business banking offers

Small business loans

Small business loans provide a straightforward way to get the money you need. Like other installment loans, most small business loans lend you a lump sum that you then pay back at regular intervals.

One potential drawback of getting funded by a business loan is that you may not meet the requirements set by a lender, particularly if you are just starting out &#; most lenders require you to have been in business for at least six months and have a minimum monthly revenue of at least $15,000.

That said, some lenders have more flexibility with these standards. Kiva, for instance, is a peer-to-peer lender offering microloans of up to $15,000. The loans come at 0% interest, however, business owners must crowdfund their loan first from friends and family, then from Kiva's larger network of individuals willing to contribute.

Kiva

• Types of loans

  Peer-to-peer crowdfunded loan

• Better Business Bureau (BBB) rating

  N/A

• Loan amounts

  $1,000 to $15,000

• Terms

  Up to 3 years

• Minimum credit score needed

  No minimum credit score required

• Minimum requirements

  You must be 18, live in the U.S., use this loan for business purposes, not currently in foreclosure, bankruptcy or have any liens, and have a small number of your friends and family willing to make a loan to you (Nevada and North Dakota residents are not ineligible)

Terms apply.

Kiva's only requirements are that you must be at least 18, live in the U.S., use this loan for business purposes and not currently be in foreclosure, bankruptcy or have any liens. These requirements, plus the fact you can crowdfund a 0% interest loan, make Kiva an appealing option if you're just getting started and can't meet the lofty revenue and business activity requirements set by many other lenders.

And if you have been in business for a few months, you should consider Credibly. This lender offers term loans, working capital loans and other funding options. You can apply for as much as $600,000 and the lender considers credit scores as low as 500. You'll also need to have been in business for a minimum of six months and have an average monthly revenue of at least $15,000.

Credibly

• Types of loans

  Long-term loans, working capital loans, business line of credit and merchant cash advance

• Better Business Bureau (BBB) rating

  A+

• Loan amounts

  $5,000 to $600,000

• Terms

  3&#;24 months

• Minimum credit score needed

  500+

• Minimum requirements

  Must have been in business for at least six months and have average monthly revenue of at least $15,000

Terms apply.

Business credit cards

A business credit card is a form of revolving credit that you can use repeatedly to borrow money as long as you're making the minimum monthly payment on your bill. But while this can be an easy way to fund business expenses, the interest rate on cards usually exceeds the rate charged by most reputable business loans, so you'll want to try to pay off your balance in full each month. 

A business credit card may prove more accessible than a loan if you're just starting your business. Many card issuers will use your personal credit history to decide on your application, which is helpful if your business credit history and score are thin. A card particularly well-suited to new business owners is the Capital One Spark 1% Classic. This card has no annual fee and you'll usually qualify with an average credit score (or better).

Capital One Spark 1% Classic

Information about the Capital One Spark Classic has been collected independently by CNBC Select and has not been reviewed or provided by the issuer prior to publication.

• Rewards

  Earn unlimited 5% cash back on hotels and rental cars booked through Capital One Travel and 1% on all other purchases

• Welcome bonus

  None

• Annual fee

  $0

• Intro APR

  None

• Regular APR

  29.99% variable

• Balance transfer fee

  None

• Foreign transaction fee

  None

• Credit needed

  Average

Terms apply.

Another solid option is the Ink Business Unlimited® Credit Card since it also has no annual fee and offers a 12-month 0% intro APR period (after, 17.99% - 23.99% variable) &#; meaning you make purchases for your business and have 12 months to pay it back without being charged any interest. This can be particularly appealing if you need to spend more than just a few hundred dollars to start your business and don't want to get hit with interest before you can pay back all the money.

Before you apply, be sure to create a plan for paying back your balance before that 12-month introductory period is over.

Ink Business Unlimited® Credit Card

• Rewards

  Earn 1.5% cash back on every purchase made for your business

• Welcome bonus

  Earn $750 bonus cash back after you spend $6,000 on purchases in the first 3 months from account opening

• Annual fee

  $0

• Intro APR

  0% for the first 12 months from account opening on purchases; N/A for balance transfers

• Regular APR

  17.99% - 23.99% variable

• Balance transfer fee

  Either $5 or 5% of the amount of each transfer, whichever is greater

• Foreign transaction fee

  3%

• Credit needed

  Good/Excellent

Terms apply.

Grants

A grant is a lump sum of money provided by an organization that doesn't need to be paid back (unlike a loan). Business grants are typically offered by government organizations, corporations and nonprofits. Grants can be used to cover many different kinds of expenses, including hiring employees, purchasing inventory, day-to-day operating expenses, marketing and more.

Depending on the grant, recipients will usually need to meet certain eligibility criteria to receive funding. Some examples include:

• Woman-owned businesses
• Minority-owned businesses
• Veteran-owned businesses
• Rural businesses or businesses in economically disadvantaged communities
• Businesses in certain industries like agriculture, technology or education

Grant funding can also range from a few hundred to hundreds of thousands of dollars.

Because grant money doesn't need to be paid back, your business won't have to worry about piling on debt before its doors are even opened.

You must fill out an application to be considered (and submit any other required material). However, some grant consideration processes are quite lengthy and it can take months before you receive an update on your application. Also, some private organizations only award a small handful of grants per year, meaning you can't depend on receiving a grant even if you do meet all the qualifications.

If you want to learn more, please visit our website Herofu.

Here are some of the more popular, well-known grants for small businesses:

• FedEx Small Business Grant
• Amber Grant
• Freed Fellowship Grant
• Cartier Women's Initiative Program
• Restaurant Disaster Relief Fund

Bootstrapping

Bootstrapping is one of the most basic strategies for funding your business. It simply involves spending your own money &#; whether it's personal savings or income from your primary job &#; to get operations off the ground. It's by far the simplest way to get your business going, with the giant caveat that you need enough personal wealth to pull it off.

That's why bootstrapping works best for businesses with relatively low startup costs (like an e-commerce business with little overhead), rather than an enterprise that requires machinery, office space or multiple employees right off the bat. If you're saving up personal funds to use for your small business, consider putting that money in a high-yield savings account, which earns you much more interest than a traditional savings account. Granted, you may not earn hundreds or thousands of dollars in interest, but the interest you do earn may still help you reach your goal faster.

The Synchrony Bank High Yield Savings Account is known for offering a strong APY with no required minimum balance and no monthly fee. This means you won't be charged for not meeting a specific monthly balance requirement. You'll also receive an ATM card for even easier access to your money.

Synchrony Bank High Yield Savings

Synchrony Bank is a Member FDIC.

• Annual Percentage Yield (APY)

  4.30% APY

• Minimum balance

  None

• Monthly fee

  None

• Maximum transactions

  Up to 6 free withdrawals or transfers per statement cycle

• Excessive transactions fee

  None

• Overdraft fee

  None

• Offer checking account?

  No

• Offer ATM card?

  Yes

Terms apply.

CNBC Select also considers the Capital One 360 Performance Savings&#; account as another strong option. This account doesn't have a minimum balance requirement and doesn't charge a monthly fee. However, it does offer a checking account with ATM card access. This could be a good choice if you want a brick-and-mortar bank with thousands of physical branches across the U.S.

Capital One 360 Performance Savings&#;

Capital One Bank is a Member FDIC.

• Annual Percentage Yield (APY)

  4.00% APY

• Minimum balance

  None

• Monthly fee

  None

• Maximum transactions

  Up to 6 free withdrawals or transfers per statement cycle

• Excessive transactions fee

  None

• Overdraft fee

  None

• Offer checking account?

  Yes

• Offer ATM card?

  Yes, if have a Capital One checking account

• Terms apply.

Read our Capital One 360 Performance Savings&#; review.

Crowdfunding

Crowdfunding involves raising small amounts of money from a large pool of people. You set a total fundraising goal and the small contributions add up to help you reach that goal. These fundraising campaigns typically come with a lime limit (often a few months), after which you'll often have to return any funds given to you if you fail to meet your goal.

Two common forms of crowdfunding include equity crowdfunding and rewards-based crowdfunding. With equity crowdfunding, individuals contribute money to a business in exchange for the possibility of gaining a small percentage of ownership in the business in the future. Equity crowdfunding is commonly used by young startups that aim to grow quickly and eventually raise venture capital funding, so most small businesses that intend on being self-sustaining don't opt for equity crowdfunding.

Rewards-based crowdfunding, on the other hand, is when a business offers contributors some sort of perk like branded merchandise or some other special free offer in exchange for their financial support.

Kickstarter and Indiegogo are two of the most popular rewards-based crowdfunding platforms. They both collect a 5% fee on successfully funded campaigns, but neither platform charges a fee if you don't hit your fundraising goal. Both Kickstarter and Indiegogo may charge a payment processing fee for every contribution or "pledge" paid to your campaign.

Be sure to keep these fees in mind when launching a crowdfunding campaign since they are usually deducted from your fundraised total.

Indiegogo

• Cost

  5% of total funds raised; payment processing fee of 3% + $0.20 per pledge

• Standout features

  Project categories offered include energy and green tech, film, health and fitness, video games, home, audio, phones and accessories and travel and the outdoors.

Kickstarter

• Cost

  5% of total funds raised; payment processing fee of 3% + $0.30 per pledge

• Standout features

  Project categories are quite diverse and range from arts and crafts, design, dance, music, publishing, technology and more. Business owners and creators launch a project and set a funding goal with a deadline. You'll only be charged if you reach your funding goal by that deadline.

FAQs

Can you get a business loan with no revenue?

Most lenders have significant revenue requirements to qualify for a business loan. However, it may be possible to get a business loan with no revenue if you apply to lenders with flexible and low or no revenue requirements.

Can I get a business loan with a 500 credit score?

You can get a business loan with a 500 credit score, but it will be difficult. If you have fair or poor credit, consider lenders that cater to individuals with less-than-ideal credit. Keep in mind you may be subject to higher interest rates and other less favorable loan terms.

What are the advantages and disadvantages of bootstrapping?

Bootstrapping can be advantageous because it involves using your own personal savings to fund your business and you won't have to worry about paying back a lender or defaulting on a loan. And if your startup costs are low enough, you may not run the risk of burning through all of your savings quickly.

However, if your startup costs are high, bootstrapping could mean using all of your money to start a business. This can be risky and you'll want to make sure you have additional money on the sidelines for emergencies and other life needs.

Subscribe to the CNBC Select Newsletter!

Money matters &#; so make the most of it. Get expert tips, strategies, news and everything else you need to maximize your money, right to your inbox. Sign up here.

Why trust CNBC Select? 

At CNBC Select, our mission is to provide our readers with high-quality service journalism and comprehensive consumer advice so they can make informed decisions with their money. Every article is based on rigorous reporting by our team of expert writers and editors with extensive knowledge of small business products. To research the best insurance companies, we compiled over 100 data points on more than a dozen insurance companies. While CNBC Select earns a commission from affiliate partners on many offers and links, we create all our content without input from our commercial team or any outside third parties, and we pride ourselves on our journalistic standards and ethics. See our methodology for more information on how we choose the best commercial auto insurance companies. 

Catch up on CNBC Select's in-depth coverage of credit cards, banking and money, and follow us on TikTok, Facebook, Instagram and Twitter to stay up to date.

Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the Select editorial staff&#;s alone, and have not been reviewed, approved or otherwise endorsed by any third party.

If you are looking for more details, kindly visit Cpet Film.