How to Start a Business

How to Start a Business

5 Best Industries for Starting a Business in 2017

Small Business, Starting a Business

5 Best Industries for Starting a Business in 2017

Small Business, Starting a Business
You can trust that we maintain strict editorial integrity in our writing and assessments; however, we receive compensation when you click on links to products from our partners and get approved. Here's how we make money.
5 best industries for starting a business

Small businesses are certainly not few and far between. According to the U.S. Small Business Administration, there are 29.6 million of them operating across the country. If you’re interested in successfully joining their ranks, the last thing you want to do is start a business in an industry with a gloomy outlook. Here are five industries with promising futures, based on data from the U.S. Bureau of Labor Statistics, market research firm IBISWorld and financial information company Sageworks.

 

Jump to top industries

Health care
Marijuana
E-commerce
Tech
Home and building maintenance

1. Health care

As the 75 million baby boomers age, there’s increased demand for health care services. According to an outlook by the Bureau of Labor Statistics, more than half of the 20 occupations projected to have the highest percent increase in employment by 2024 are in the health industry. Meeting the needs of an aging population creates opportunities for physical therapists, doctors, optometrists and other specialists to open their own practices.

Don’t have the expertise to open that kind of business? Starting a home health aide staffing firm is one idea you could pursue. According to the bureau, employment of home health aides is expected to increase 38% by 2024, and finding employees may be relatively easy since the job doesn’t require a degree.

[Back to top]

» MORE: 17 accessible small-business ideas

2. Marijuana

Good news for those with green thumbs: 28 states and the District of Columbia have legalized medical marijuana. IBISWorld predicts that industry revenue for medical and recreational marijuana growers will jump 33.5% over the next five years. The retail side of the business is also expected to see sales rise this year, according to the firm.

But for every high, there’s a low. Because the drug remains illegal at the federal level, says Dmitry Diment, a senior industry analyst at IBISWorld, new growth opportunities arise only when regulations are approved by the states. Those at the forefront of medical and recreational marijuana — like Colorado, Washington, Oregon and California — offer the best examples of how the industry could evolve, he adds.

[Back to top]

3. E-commerce

Personal disposable income is projected to grow by 4% per year from 2014 to 2024, according to the Bureau of Labor Statistics, and as disposable income grows, so does the “quantity and quality of online purchases,” IBISWorld says.

But e-commerce can be an easily saturated market, given low barriers of entry. To increase your online business’s chance of success, focus on your customers — whether through customizable products, timely support or fast delivery of products, IBISWorld industry analyst Madeline LeClair says.

[Back to top]

» MORE: Bad credit? Where to find business loans

4. Tech

In a similar vein, continued innovation in the tech world means continued opportunities for tech-savvy entrepreneurs. IBISWorld projects a 31% revenue boost for smartphone app developers alone in 2017. Don’t forget about the support side of the industry; Sageworks found that tech consulting and installation services had strong sales growth in 2016.

[Back to top]

5. Home and building maintenance

From landscaping to cleaning to pest control, businesses in maintenance industries that service residences and commercial buildings saw a 13% increase in sales in 2016, according to Sageworks. If you gain the right expertise, Sageworks analyst James Noe says, these businesses are easy to start because they have relatively low upfront costs and don’t require large inventory, staff or dedicated office space.

[Back to top]

Insider tips: Sign up for our monthly small-business newsletter.

Want to start a business?

NerdWallet has rounded up some of our best information on starting a business, including structuring and naming your company, creating a solid plan and much more. We’ll help you do your homework and get started on the right foot.

Jackie Zimmermann is a staff writer at NerdWallet, a personal finance website. Email: jzimmermann@nerdwallet.com. Twitter: @jackie_zm.

This article was written by NerdWallet and was originally published by The Associated Press.

Updated July 19, 2017.

How to Start a Business

How to Name a Business: 7 Keys to Pick the Perfect Moniker

Small Business

How to Name a Business: 7 Keys to Pick the Perfect Moniker

Small Business
How to Name a Business: 7 Keys to Pick the Perfect Moniker

Deciding what to call your business is a fun and exciting part of starting a business. But the process can also be a hard stop for business owners struggling to find the perfect balance of wit, relevance and personality.

Some people are lucky to have a name from the beginning that they’re excited about, says Evan Horowitz, a small business growth expert. “But often times it can be paralyzing.”

It doesn’t have to be. When deciding how to name your business, the key is to find a name that fits who you are and what your business is about. Obviously, you want a name that stands out — one that’s catchy, even quirky (Hi, Google.). But it’s important to have a story and a clear message behind your small business name, says Ivana Taylor, CEO of Cleveland marketing company Third Force and founder of DIYMarketers.

“Before you select a name for your business, before you run out and get business cards, before you spend a single cent or a single minute on any kind of advertising or promotional effort, invest your time and effort in crafting a killer marketing message,” she says.

How to name a business: 7 keys to remember

Taylor, whose company gives marketing advice to small businesses, offers these tips for coming up with a company name:

  1. Make it short. “Remember, your domain will also be used for social media profiles, so shorter is better,” she says.
  2. Make it memorable. “We don’t just type anymore, so make your name easy to remember,” Taylor says. “Also, if you have the kind of business that you’ll be promoting via video or radio, you’ll want to be able to say it and have people remember it.”
  3. Make it pronounceable. This is just as important as being memorable, Taylor says, “because if people can’t pronounce it, they won’t be able to remember or spell it.”
  4. It should be easy to spell a single way. “You don’t want to waste your marketing time and money teaching people how to spell your name. That doesn’t mean that you can’t get creative.”
  5. It should be “descriptive” or “brandable.” Taylor cites her own company name, DIYMarketers, which she said is “so clear, so brandable you don’t need to be a rocket scientist to understand what kind of site this is.”
  6. Don’t use hyphens. “Hyphens confuse people and will literally send your potential customers to someone else when they type in your domain without the hyphen,” Taylor says.
  7. Go for a .com extension. “I always aim for a domain that has a .com extension as well as an open .net extension,” she says. Not only are these the most common extensions, but often, users “are on autopilot and they enter dot-com,” she says. But you can also be creative, Taylor notes, pointing Visual.ly, a visual content services company that used the extension “.ly.”

» COMPARE: Small-business lenders 2017

Make sure you can use it

Just as crucial as a business name idea that fits the personality and goals of your small business is figuring out whether someone else is already using it. Here’s how to go about it.

  • Start with a basic web search.
  • When you incorporate your small business, you will need to check the registration process in your state, including the requirements for registering your business name. This process varies by state; the SBA website includes a list of these agencies.
  • The best way to check availability of the domain name based on your proposed company name is to check the sites of the Internet Corporation for Assigned Names and Numbers, better known as ICANN, which operates the Internet Corporation for Assigned Names, or InterNIC.
  • You can register your domain name with a domain name registrar. There’s a list of ICANN-accredited domain registrars on the organization’s website.
  • It’s also smart to create accounts on various social media platforms, including Facebook, Twitter, LinkedIn and Instagram.
  • A critical step is finding out whether you can legally use a name for your company based on federal trademark laws. For this, the best resource is the U.S. Patent and Trademark Office. Its website includes a step-by-step process of applying for a company trademark if the name you want is available.

This last point is the most important, especially if you want to steer clear of legal headaches. You’ve no doubt heard the horror stories of small businesses that found themselves mired in legal battles with corporate giants over naming rights.

If you find yourself really struggling to pick a name, you may not be stuck with it. Companies change their names all the time, Horowitz says.

Insider tips: Sign up for our monthly small-business newsletter.

Want to start a business?

NerdWallet has rounded up some of our best information on starting a business, including structuring and naming your company, creating a solid plan and much more. We’ll help you do your homework and get started on the right foot.

Updated July 19, 2017.

Staff writer Jackie Zimmermann contributed to this article.


Get Your Free Personal Credit Score Every Week from NerdWallet

  • Open more doors for financing your business.
  • Set your goals and track your progress.
  • Signing up won't affect your score.

SMB_industry-guide-largerCTA1

 

How to Start a Business

How to Write a Business Plan, Step by Step

Small Business, Starting a Business

How to Write a Business Plan, Step by Step

Small Business, Starting a Business
You can trust that we maintain strict editorial integrity in our writing and assessments; however, we receive compensation when you click on links to products from our partners and get approved. Here's how we make money.
How to Write a Business Plan, Step by Step

A business plan can make or break a small business. A strong, detailed plan provides a clear road map for the future, forces you to think through the validity of a business idea, and can give you much greater understanding of your business’s financials and the competition.

A business plan typically looks out over three to five years, detailing all of your goals and how you plan to achieve them. If you’re applying for a loan or looking for investors, a business plan shows you’re prepared and have fully vetted your business idea, says Craig Allen, a financial advisor who teaches business plan writing classes at Southern New Hampshire University.

“If you have no financial forecast, which is part of the business plan, it’s very difficult to show the bank how you are going to repay the loan,” Allen says.

Here is a step-by-step guide to writing a business plan:

PLUS: Business plan tips and resources


Get Your Free Personal Credit Score Every Week from NerdWallet

  • Open more doors for financing your business.
  • Set your goals and track your progress.
  • Signing up won't affect your score.


Executive summary

This is the first page of your business plan. It should include a mission statement, which explains the main focus of your business, as well as a brief description of the products or services offered, basic information such as ownership structure, and a summary of your plans.

[Back to top]

Company description

This section provides a snapshot of your small business. It contains important information including its registered name, address of any physical locations, names of key people in the business, history of the company, nature of the business and more details about products or services that it offers or will offer.

[Back to top]

Objective statement or business goals

An objective statement should clearly define your company’s goals and contain a business strategy that details how you plan to achieve them. It spells out exactly what you’d like to accomplish, both in the near term and over the long term.

If you’re looking for outside funding, you can use this section to explain why you have a clear need for the funds, how the financing will help your business grow, and how you plan to achieve your growth targets. The key is to provide a clear explanation of the opportunity presented and how the loan or investment will grow your company.

For example, if your business is launching a second product line, you might explain how the loan will help your company launch the new product and increase its sales by 50% over the next three years.

» MORE: Best loans for working capital

[Back to top]

Business and management structure

Here, you’ll list your business’s legal structure — such as a sole proprietorship, partnership or corporation — as well as key employees, managers or other owners of the business. It should also include the percent ownership that each owner has and the extent of each owner’s involvement in the company.

[Back to top]

Products and services

In this section, you can detail the products or services you offer or plan to offer. It should include the following:

  • An explanation of how your product or service works
  • The pricing model for your product or service
  • The typical customers you serve
  • Your sales and distribution strategy
  • Why your product or service is better than what the competition is offering
  • How you plan to fill orders

You can also discuss current or pending trademarks and patents associated with your product or service.

[Back to top]

Marketing and sales plan

This is simply an explanation of what your marketing strategy is and how you will execute it. Here, you can address how you plan to persuade customers to buy your products or services, or how you will develop customer loyalty that will lead to repeat business. This section can also highlight the strengths of your business and focus on what sets your business apart from your competition.  

[Back to top]

Business financial analysis

If you’re a startup, you may not have much information on your business financials yet. However, if you’re an existing business seeking financing, you’ll want to include income or profit-and-loss statements, a balance sheet that lists your assets and debts, and a cash flow statement that shows how cash comes into and goes out of the company.

You may also include ratios that highlight the financial health of your business, such as:

  • Net profit margin: the percentage of revenue you keep as net income
  • Current ratio: the measurement of your liquidity and ability to repay debts
  • Accounts receivable turnover ratio: a measurement of how frequently you collect on receivables per year

[Back to top]

Financial projections

This is a critical part of your business plan if you’re seeking financing or investors. It outlines how your business will generate enough profit to repay the loan or how you will earn a decent return for investors.

Here, you’ll provide your business’s monthly or quarterly sales, expenses and profit estimates over at least a three-year period — with the future numbers assuming you’ve obtained a new loan. Accuracy is key, so carefully analyze your past financial statements before giving projections.

Your goals may be aggressive, but they should also be realistic. “It’s OK to be optimistic if you can justify it,” Allen says. “In general, you don’t want to stand out in a negative way by being too optimistic.”

You want to show that your business can generate strong enough cash flow to cover the regular debt payments on a loan. But you should also address the various risk factors of the business, Allen says.

“The loan officer is definitely going to want to know that you’ve thought through all of the potential risks and that you’ve mitigated those risks in some way,” he says.

[Back to top]

Appendix

List any supporting information or other additional information that you couldn’t fit in elsewhere, such as resumes of key employees, licenses, equipment leases, permits, patents, receipts, bank statements, contracts, and personal and business credit history. If the appendix is long, you may want to consider adding a table of contents at the beginning of this section.

[Back to top]

Business plan tips and resources

Now that you’ve written your business plan, here are some tips to help your hard work stand out:

Avoid over-optimism: If you’re applying for a business loan at a local bank, the loan officer likely knows your market pretty well. Providing unreasonable sales estimates can hurt your chances of loan approval.

“They know what you can expect sales to be for that type of business in that market,” Allen says. “If you walk in with a sales forecast 50% higher than other businesses, they are going to know that you are not being realistic, and that’s going to work against you.”

Keep it concise: All you need is 15 to 25 pages for a good business plan, as long as the plan is clear, concise and contains all of the relevant information, Allen says.

Focus on the key elements of your business plan and avoid getting too bogged down by the technical aspects of your business or using too much industry jargon. You can always put supporting information or other important details in the appendix.

Proofread: Spelling, punctuation and grammatical errors can jump off the page and turn off lenders and prospective investors, taking their mind off your business and putting it on the mistakes you made. If writing and editing aren’t your strong suit, you may want to hire a professional business plan writer, copy editor or proofreader.

“I always feel like if the person can’t even bother to proofread something that they wrote, how detail-oriented is this person in running their business?” Allen says.

Use free resources: SCORE is a nonprofit association that offers a large network of volunteer business mentors and experts who can help you write or edit your business plan. You can search for a mentor or find a local SCORE chapter for more guidance.

The U.S. Small Business Administration’s Small Business Development Centers, which provide free business consulting and help with business plan development, can also be a resource.

[Back to top]

INSIDER TIPS: Sign up for our monthly small-business newsletter.

Learn more about starting your business

NerdWallet has rounded up some of our best information on starting a business, including structuring and naming your company, creating a solid plan and much more. We’ll help you do your homework and get started on the right foot.

Steve Nicastro is a staff writer at NerdWallet, a personal finance website. Email: Steven.N@nerdwallet.com. Twitter: @StevenNicastro.

For related information, visit NerdWallet’s guide on how to start a business.

Updated July 19, 2017.

SMB_industry-guide-largerCTA1

How to Start a Business

Business Structure: How to Choose the Right One for You

Small Business

Business Structure: How to Choose the Right One for You

Small Business
You can trust that we maintain strict editorial integrity in our writing and assessments; however, we receive compensation when you click on links to products from our partners and get approved. Here's how we make money.
Business Structure: How to Choose the Right One for You

Designing a killer website, prototyping your product, talking your way to your first big order — these parts of starting your business likely stir your entrepreneurial passions.

The business structure of your new enterprise? Not so exciting.

But hold on. Careful consideration of which structure is right for you is crucial because it will have implications for how the IRS taxes your business profits. It’ll also determine whether your personal property is protected when others demand money from your business. Other considerations, including the management of the new business and your long-term plans for it, come into play as well.

Below, we’ve outlined types of business structures and what you should consider before choosing one.

Choosing your business structure: What to consider

Business structure options

Business structures are largely creations of state law, so there are minor variations on the details from state to state. Here are five common models:

Sole proprietorship

An unincorporated business that is owned by one person who reports business profits on his or her individual tax return. A sole proprietorship is the simplest business structure and is straightforward to start.

Partnership

An unincorporated business owned by multiple owners, either people or other businesses. Profits are divided among its owners and reported on their tax returns. Common partnership types include general partnerships, limited partnerships, limited liability partnerships (LLPs) and limited liability limited partnerships (LLLPs).

Limited liability company (LLC)

An LLC is a hybrid business structure that limits the personal liability of its owners — called members — like a corporation but allows the profits to be taxed on either a member level or the corporate level.

S corporation

An S corporation has one class of stock and no more than 100 shareholders, none of whom can be another for-profit business or a person without a green card who doesn’t meet IRS residency requirements. Profits are taxed on shareholders’ tax returns, and shareholders have limited liability.

C corporation

A corporation whose profit is taxed once on the business level and a second time on an individual basis when earnings are distributed to shareholders, who have limited liability for the business’s debts. C corporations can have multiple classes of stock and an unlimited number of shareholders.

Switching business structures is possible, but it’s best to decide early on which one you’ll need for the next few years. It can get complicated — not to mention pricey, in terms of legal fees — to change structures, and the effort could distract from running your business.

[Back to top]


Get Your Free Personal Credit Score Every Week from NerdWallet

  • Open more doors for financing your business.
  • Set your goals and track your progress.
  • Signing up won't affect your score.

 

Choosing your business structure: What to consider


What’s your tolerance for risk to personal assets?

When you run a business, you’re at greater risk for a lawsuit. Why? Businesses interact with the world — other businesses, government, regular people — much more than most individuals, and when they do, there’s a good chance money’s involved.

In a sole proprietorship, if your business is sued and loses, your personal assets — real estate, cars, bank accounts — can be targets for the parties seeking to collect damages. The same can be said, in some cases, if you default on a business loan and you signed a personal guarantee, or the lender placed a lien on your assets. The lender can attempt to recover its investment from your personal property.

» COMPARE: Small-business lenders 2017

In a general partnership, creditors can go after any of the partners’ personal assets to recoup the whole debt. It’s different in a limited partnership, where only the general partners are personally liable for the debts of the business, while limited partners are liable for the business’s debts only up to the amount of their investment. More common among lawyers are limited liability partnerships, which limit partners’ liability for the firm’s debts but still hold them individually liable for their professional activities. There are also limited liability limited partnerships, a sort of limited partnership that extends limited liability to general partners, not just limited partners.

LLCs and corporations limit their members’ or shareholders’ liability, so personal assets are protected.

How do you want the IRS to tax your business profits?

Sole proprietorships, partnerships and S corporations are pass-through entities, as are some LLCs. In a pass-through entity, profits are passed directly to the owners of the business. Come tax time, it is reported on the owners’ individual returns.

By default, the IRS views LLCs as pass-through entities unless they opt to be taxed as a corporation.

C corporations are separate entities from their owners, so their profits are taxed at the corporate level. If a corporation pays out dividends, which come out of its after-tax income, shareholders also must pay taxes on their proceeds.

How formal do you want your management structure to be?

If multiple owners are involved, structuring the business can be more complicated.

Partnerships are typically governed by agreements that specify how profits from the business are divided among parties and what happens when a partner retires, becomes disabled, declares bankruptcy or dies.

An S corporation or C corporation is required by law to have a board of directors to oversee the company’s direction on behalf of the shareholders.

An LLC structure generally allows the choice between being managed by members or overseen by a management team, which can include members or nonmembers. LLCs typically draw up an operating agreement that specifies roles.

How much administrative complexity can you handle?

For noncorporation business structures, initial paperwork and fees are relatively light, and are simple enough for owners to handle without special expertise (though it’s a good idea to consult a lawyer or an accountant for help). Ongoing requirements usually come on an annual basis.

For S and C corporations, the administrative complexity increases, and you will almost certainly need a lawyer and accountant. In every state, there are tax and legal hoops to jump through for corporations to become and remain compliant. Failure to meet deadlines, pay certain fees and file the proper forms can result in penalties.

What are your long-term goals for the business?

The right structure doesn’t just depend on the state of your business today; it also depends on where you would like to be in three to five years, or even longer.

If you’re looking for fast growth, which takes cash, C corporations allow for multiple classes of stock and don’t restrict the number or type of shareholders. They’re the best fit if you’re seeking investments from venture capitalists, or if you plan on becoming a publicly traded company, rather than a privately owned one, in the near- or mid-term.

Another consideration is what happens when you or another owner dies, goes bankrupt or withdraws. Corporations live on after these events, but generally the other types of business structure dissolve unless specified otherwise beforehand.

[Back to top]

Insider tips: Sign up for our monthly small-business newsletter.

Learn more about starting your business

NerdWallet has rounded up some of our best information on starting a business, including structuring and naming your company, creating a solid plan and much more. We’ll help you do your homework and get started on the right foot.

Updated July 19, 2017.

Andrew L. Wang is a staff writer at NerdWallet, a personal finance website. Email: awang@nerdwallet.com. Twitter: @andrew_L_wang.

SMB_industry-guide-largerCTA1

How to Start a Business

Business Funding: Where to Get Financing

Small Business, Small Business Loans

Business Funding: Where to Get Financing

Small Business, Small Business Loans
You can trust that we maintain strict editorial integrity in our writing and assessments; however, we receive compensation when you click on links to products from our partners and get approved. Here's how we make money.
Business Funding: Where to Get Financing

So, you’ve come up with the business idea. It fills a need, it has an audience, and you have a detailed business plan to prove it. Now, how are you going to acquire the financing you need to actually get your small business started?

The capital you need to launch, maintain or grow your business can come from a variety of sources, including traditional banks and online alternative lenders. Finding the right funding depends on the strength of your business and your own financial history. To help you find a good fit, we’ve highlighted six of the most common options for small businesses. Once you determine the best fit, there are steps you can take to increase your chances of getting a business loan.

1. Banks

For: Established businesses with collateral and strong credit

Traditional banks are a great starting point and can help you figure out where you stand in terms of qualifying for funding. Even if your business doesn’t have a strong enough track record or enough assets as collateral to qualify for a bank loan, talking to someone at a traditional bank can help you figure out what documents you need and what your best options may be.

Locally owned banks, in particular, are a great resource for small businesses because they often have a strong interest in economic development in the community. In the third quarter of 2016, the Federal Deposit Insurance Corp. found that 43% of small loans to businesses came from community banks.


Get Your Free Personal Credit Score Every Week from NerdWallet

  • Open more doors for financing your business.
  • Set your goals and track your progress.
  • Signing up won't affect your score.

2. SBA

For: Businesses who don’t meet traditional banks’ strict lending criteria

The U.S. Small Business Administration offers lenders, mostly traditional banks, a federal guarantee on your loan. This makes it less risky for banks to lend you the funds you need to be successful. In guaranteeing the loans, the SBA also connects you with favorable rates offered by traditional lenders. And unlike most bank loans, you can use an SBA loan to start a business.

» MORE: Bad credit? Where to find business loans

However, the application process isn’t easy, and you can find yourself trapped under a heap of documents while you work through the appropriate forms. Online lender SmartBiz provides a more streamlined SBA application process, originating SBA loans faster than traditional banks.

We recommend the following ways to finance your business:

Funding option

Why we recommend

Find a lender

Personal loan
SMB_Personal_Loans_t



  • A personal loan can be a source of startup funding because approval is typically based on your personal credit score.

  • NerdWallet recommends taking a maximum of $35,000 to fund your business.


Compare lenders with NerdWallet's loan tool

Business credit card
SMB_Business_CC_t



  • You can get competitive rates and perks, such as 0% interest periods, if you have good credit.

  • NerdWallet recommends borrowing smaller amounts to be repaid quickly.


Compare credit cards with NerdWallet
We recommend the following ways to finance your business:

Funding option

Why we recommend

Find a lender

Personal loan
SMB_Personal_Loans_t



  • A personal loan can be a source of early funding because approval is typically based on your personal credit score.

  • NerdWallet recommends taking a maximum of $35,000 to fund your business.


Compare lenders with NerdWallet's loan tool

Business credit card
SMB_Business_CC_t



  • A business credit card provides flexible access to cash.

  • If you have growing revenue, you can tap credit as needed and repay quickly.


Compare credit cards at NerdWallet

Microloan
SMB_Microloan_t



  • A microloan is a good option if you have limited revenue and history.

  • Microloans are typically less than $50,000.


Compare microlenders at NerdWallet
We recommend the following ways to finance your business:

Funding option

Why we recommend

Find a lender

Invoice Factoring
SMB_Invoice_Factoring_t



  • You can turn your unpaid customer invoices or receivables into upfront cash.

  • Invoice factoring is a good option to manage cash-flow gaps.


Compare lenders with NerdWallet's loan tool

Personal loan
SMB_Personal_Loans_t



  • A personal loan can be a source for newer businesses because approval is typically based on your personal credit score.

  • NerdWallet recommends taking a maximum of $35,000 to fund your business.


Compare lenders with NerdWallet's loan tool

Business credit card
SMB_Business_CC_t



  • A business credit card provides flexible access to cash.

  • If you have growing revenue, you can tap credit as needed and repay quickly.


Compare credit cards at NerdWallet

Microloan
SMB_Microloan_t



  • A microloan is a good option if you have limited revenue and history.

  • Microloans are typically less than $50,000.


Compare microlenders at NerdWallet
We recommend the following ways to finance your business:

Funding option

Why we recommend

Find a lender

Term loan
SMB_Term_Loan_t



  • With a year or more in business and growing revenue, a term loan can provide a lump sum you can repay over a set period of time.


Compare lenders with NerdWallet's loan tool

Invoice Factoring
SMB_Invoice_Factoring_t



  • You can turn your unpaid customer invoices or receivables into upfront cash.

  • Invoice factoring is a good option to manage cash-flow gaps.


Compare lenders with NerdWallet's loan tool

Personal loan
SMB_Personal_Loans_t



  • A personal loan can be a source for newer businesses because approval is typically based on your personal credit score.

  • NerdWallet recommends taking a maximum of $35,000 to fund your business.


Compare lenders with NerdWallet's loan tool

Business credit card
SMB_Business_CC_t



  • A business credit card provides flexible access to cash.

  • It's a good option for short-term expenses as you can tap credit as needed and repay quickly.


Compare credit cards at NerdWallet

Microloan
SMB_Microloan_t



  • Since your business is growing and you have average or better credit, a microloan is a good option if you're looking for reasonable rates.

  • Microloans are typically less than $50,000.


Compare microlenders at NerdWallet
We recommend the following ways to finance your business:

Funding option

Why we recommend

Find a lender

Term loan
SMB_Term_Loan_t



  • With a year or more in business and growing revenue, a term loan can provide a lump sum you can repay over a set period of time.


Compare lenders with NerdWallet's loan tool

Line of Credit
SMB_Line_of_Credit_t



  • With growing revenue, a line of credit offers flexible spending and higher credit limits than business credit cards.


Compare lenders with NerdWallet's loan tool

Invoice Factoring
SMB_Invoice_Factoring_t



  • You can turn your unpaid customer invoices or receivables into upfront cash.

  • Invoice factoring is a good option to manage cash-flow gaps.


Compare lenders with NerdWallet's loan tool

Personal loan
SMB_Personal_Loans_t



  • A personal loan can be a source for newer businesses because approval is typically based on your personal credit score.

  • NerdWallet recommends taking a maximum of $35,000 to fund your business.


Compare lenders with NerdWallet's loan tool

Business credit card
SMB_Business_CC_t



  • A business credit card provides flexible access to cash.

  • It's a good option for short-term expenses as you can tap credit as needed and repay quickly.


Compare credit cards at NerdWallet

Microloan
SMB_Microloan_t



  • Since your business is growing and you have average or better credit, a microloan is a good option if you're looking for reasonable rates.

  • Microloans are typically less than $50,000.


Compare microlenders at NerdWallet
We recommend the following ways to finance your business:

Funding option

Why we recommend

Find a lender

Line of Credit
SMB_Line_of_Credit_t



  • With growing revenue, a line of credit offers flexible spending and higher credit limits than business credit cards.


Compare lenders with NerdWallet's loan tool

Invoice Factoring
SMB_Invoice_Factoring_t



  • You can turn your unpaid customer invoices or receivables into upfront cash.

  • Invoice factoring is a good option to manage cash-flow gaps.


Compare lenders with NerdWallet's loan tool

Personal loan
SMB_Personal_Loans_t



  • A personal loan can be a source for newer businesses because approval is typically based on your personal credit score.

  • NerdWallet recommends taking a maximum of $35,000 to fund your business.


Compare lenders with NerdWallet's loan tool

Business credit card
SMB_Business_CC_t



  • A business credit card provides flexible access to cash.

  • It's a good option for short-term expenses as you can tap credit as needed and repay quickly.


Compare credit cards at NerdWallet

Microloan
SMB_Microloan_t



  • Since your business is growing and you have average or better credit, a microloan is a good option if you're looking for reasonable rates.

  • Microloans are typically less than $50,000.


Compare microlenders at NerdWallet
We recommend the following ways to finance your business:

Funding option

Why we recommend

Find a lender

Term loan
SMB_Term_Loan_t



  • With a year in business, a term loan can provide a lump sum you can repay over a set period of time.


Compare lenders with NerdWallet's loan tool

Microloan
SMB_Microloan_t



  • Since your business is growing and you have average or better credit, a microloan is a good option if you're looking for reasonable rates.

  • Microloans are typically less than $50,000.


Compare microlenders at NerdWallet

Personal loan
SMB_Personal_Loans_t



  • A personal loan can be a source for newer businesses because approval is typically based on your personal credit score.

  • NerdWallet recommends taking a maximum of $35,000 to fund your business.


Compare lenders with NerdWallet's loan tool

Business credit card
SMB_Business_CC_t



  • A business credit card provides flexible access to cash.

  • It's a good option for short-term expenses as you can tap credit as needed and repay quickly.


Compare credit cards at NerdWallet
We recommend the following ways to finance your business:

Funding option

Why we recommend

Find a lender

Term loan
SMB_Term_Loan_t



  • With a year in business, a term loan can provide a lump sum you can repay over a set period of time.


Compare lenders with NerdWallet's loan tool

Line of Credit
SMB_Line_of_Credit_t



  • With growing revenue, a line of credit offers flexible spending and higher credit limits than business credit cards.


Compare lenders with NerdWallet's loan tool

Personal loan
SMB_Personal_Loans_t



  • A personal loan can be a source for newer businesses because approval is typically based on your personal credit score.

  • NerdWallet recommends taking a maximum of $35,000 to fund your business.


Compare lenders with NerdWallet's loan tool

Business credit card
SMB_Business_CC_t



  • A business credit card provides flexible access to cash.

  • It's a good option for short-term expenses as you can tap credit as needed and repay quickly.


Compare credit cards at NerdWallet

Microloan
SMB_Microloan_t



  • Since your business is growing and you have average or better credit, a microloan is a good option if you're looking for reasonable rates.

  • Microloans are typically less than $50,000.


Compare microlenders at NerdWallet
We recommend the following ways to finance your business:

Funding option

Why we recommend

Find a lender

Line of Credit
SMB_Line_of_Credit_t



  • With growing revenue, a line of credit offers flexible spending and higher credit limits than business credit cards.


Compare lenders with NerdWallet's loan tool

Personal loan
SMB_Personal_Loans_t



  • A personal loan can be a source for newer businesses because approval is typically based on your personal credit score.

  • NerdWallet recommends taking a maximum of $35,000 to fund your business.


Compare lenders with NerdWallet's loan tool

Business credit card
SMB_Business_CC_t



  • A business credit card provides flexible access to cash.

  • It's a good option for short-term expenses as you can tap credit as needed and repay quickly.


Compare credit cards at NerdWallet

Microloan
SMB_Microloan_t



  • Since your business is still young and you have average or better credit, a microloan is a good option if you're looking for reasonable rates.

  • Microloans are typically less than $50,000.


Compare microlenders at NerdWallet
We recommend the following ways to finance your business:

Funding option

Why we recommend

Find a lender

Personal loan
SMB_Personal_Loans_t



  • A personal loan can be a source for newer businesses because approval is typically based on your personal credit score. Your credit score should be at least 579 to qualify.

  • NerdWallet recommends taking a maximum of $35,000 to fund your business.


Compare lenders with NerdWallet's loan tool
We recommend the following ways to finance your business:

Funding option

Why we recommend

Find a lender

Personal loan
SMB_Personal_Loans_t



  • A personal loan can be a source for newer businesses because approval is typically based on your personal credit score. Your rates may be higher if you have poor credit.

  • NerdWallet recommends taking a maximum of $35,000 to fund your business.


Compare lenders with NerdWallet's loan tool

Microloan
SMB_Microloan_t



  • Since your business is growing, a microloan is a good option if you're looking for reasonable rates.

  • Some microlenders work with entrepreneurs who are building their personal credit and their business.


Compare microlenders at NerdWallet
We recommend the following ways to finance your business:

Funding option

Why we recommend

Find a lender

Invoice Factoring
SMB_Invoice_Factoring_t



  • You can turn your unpaid customer invoices or receivables into upfront cash. Your personal credit is not a major factor.

  • Invoice factoring is a good option to manage cash-flow gaps.


Compare lenders with NerdWallet's loan tool

Personal loan
SMB_Personal_Loans_t



  • A personal loan can be a source for newer businesses because approval is typically based on your personal credit score. Your rates may be higher if you have poor credit.

  • NerdWallet recommends taking a maximum of $35,000 to fund your business.


Compare lenders with NerdWallet's loan tool

Microloan
SMB_Microloan_t



  • Since your business is growing, a microloan is a good option if you're looking for reasonable rates.

  • Some microlenders work with entrepreneurs who are building their personal credit and their business.


Compare microlenders at NerdWallet
We recommend the following ways to finance your business:

Funding option

Why we recommend

Find a lender

Term loan
SMB_Term_Loan_t



  • With a year in business and growing revenue, a term loan can provide a lump sum you can repay over a set period of time.


Compare lenders with NerdWallet's loan tool

Invoice Factoring
SMB_Invoice_Factoring_t



  • You can turn your unpaid customer invoices or receivables into upfront cash. Your personal credit is not a major factor.

  • Invoice factoring is a good option to manage cash-flow gaps.


Compare lenders with NerdWallet's loan tool

Personal loan
SMB_Personal_Loans_t



  • A personal loan can be a source for newer businesses because approval is typically based on your personal credit score. Your rates may be higher if you have poor credit.

  • NerdWallet recommends taking a maximum of $35,000 to fund your business.


Compare lenders with NerdWallet's loan tool

Microloan
SMB_Microloan_t



  • Since your business is growing, a microloan is a good option if you're looking for reasonable rates.

  • Some microlenders work with entrepreneurs who are building their personal credit and their business.


Compare microlenders at NerdWallet
We recommend the following ways to finance your business:

Funding option

Why we recommend

Find a lender

Term loan
SMB_Term_Loan_t



  • With a year in business and growing revenue, a term loan can provide a lump sum you can repay over a set period of time.


Compare lenders with NerdWallet's loan tool

Line of Credit
SMB_Line_of_Credit_t



  • With growing revenue and a year of business, a line of credit offers flexible spending and higher credit limits than business credit cards.


Compare lenders with NerdWallet's loan tool

Invoice Factoring
SMB_Invoice_Factoring_t



  • You can turn your unpaid customer invoices or receivables into upfront cash. Your personal credit is not a major factor.

  • Invoice factoring is a good option to manage cash-flow gaps.


Compare lenders with NerdWallet's loan tool

Personal loan
SMB_Personal_Loans_t



  • A personal loan can be a source for newer businesses because approval is typically based on your personal credit score. Your rates may be higher if you have poor credit.

  • NerdWallet recommends taking a maximum of $35,000 to fund your business.


Compare lenders with NerdWallet's loan tool

Microloan
SMB_Microloan_t



  • Since your business is growing, a microloan is a good option if you're looking for reasonable rates.

  • Some microlenders work with entrepreneurs who are building their personal credit and their business.


Compare microlenders at NerdWallet
We recommend the following ways to finance your business:

Funding option

Why we recommend

Find a lender

Line of Credit
SMB_Line_of_Credit_t



  • With growing revenue, a line of credit offers flexible spending and higher credit limits than business credit cards.


Compare lenders with NerdWallet's loan tool

Invoice Factoring
SMB_Invoice_Factoring_t



  • You can turn your unpaid customer invoices or receivables into upfront cash. Your personal credit is not a major factor.

  • Invoice factoring is a good option to manage cash-flow gaps.


Compare lenders with NerdWallet's loan tool

Personal loan
SMB_Personal_Loans_t



  • A personal loan can be a source for newer businesses because approval is typically based on your personal credit score. Your rates may be higher if you have poor credit.

  • NerdWallet recommends taking a maximum of $35,000 to fund your business.


Compare lenders with NerdWallet's loan tool

Microloan
SMB_Microloan_t



  • Since your business is growing, a microloan is a good option if you're looking for reasonable rates.

  • Some microlenders work with entrepreneurs who are building their personal credit and their business.


Compare microlenders at NerdWallet
We recommend the following ways to finance your business:

Funding option

Why we recommend

Find a lender

Term loan
SMB_Term_Loan_t



  • With a year in business and growing revenue, a term loan can provide a lump sum you can repay over a set period of time.


Compare lenders with NerdWallet's loan tool

Personal loan
SMB_Personal_Loans_t



  • A personal loan can be a source for newer businesses because approval is typically based on your personal credit score. Your rates may be higher if you have poor credit.

  • NerdWallet recommends taking a maximum of $35,000 to fund your business.


Compare lenders with NerdWallet's loan tool

Microloan
SMB_Microloan_t



  • Since your business is growing, a microloan is a good option if you're looking for reasonable rates.

  • Some microlenders work with entrepreneurs who are building their personal credit and their business.


Compare microlenders at NerdWallet
We recommend the following ways to finance your business:

Funding option

Why we recommend

Find a lender

Term loan
SMB_Term_Loan_t



  • With a year in business and growing revenue, a term loan can provide a lump sum you can repay over a set period of time.


Compare lenders with NerdWallet's loan tool

Line of Credit
SMB_Line_of_Credit_t



  • With growing revenue, a line of credit offers flexible spending and higher credit limits than business credit cards.


Compare lenders with NerdWallet's loan tool

Personal loan
SMB_Personal_Loans_t



  • A personal loan can be a source for newer businesses because approval is typically based on your personal credit score. Your rates may be higher if you have poor credit.

  • NerdWallet recommends taking a maximum of $35,000 to fund your business.


Compare lenders with NerdWallet's loan tool

Microloan
SMB_Microloan_t



  • Since your business is growing, a microloan is a good option if you're looking for reasonable rates.

  • Some microlenders work with entrepreneurs who are building their personal credit and their business.


Compare microlenders at NerdWallet
We recommend the following ways to finance your business:

Funding option

Why we recommend

Find a lender

Line of Credit
SMB_Line_of_Credit_t



  • With growing revenue and a year in business, a line of credit offers flexible spending and higher credit limits than business credit cards.


Compare lenders with NerdWallet's loan tool

Personal loan
SMB_Personal_Loans_t



  • A personal loan can be a source for newer businesses because approval is typically based on your personal credit score. Your rates may be higher if you have poor credit.

  • NerdWallet recommends taking a maximum of $35,000 to fund your business.


Compare lenders with NerdWallet's loan tool

Microloan
SMB_Microloan_t



  • Since your business is growing, a microloan is a good option if you're looking for reasonable rates.

  • Some microlenders work with entrepreneurs who are building their personal credit and their business.


Compare microlenders at NerdWallet
We recommend the following ways to finance your business:

Funding option

Why we recommend

Find a lender

Invoice Factoring
SMB_Invoice_Factoring_t



  • You can turn your unpaid customer invoices or receivables into upfront cash. Your personal credit is not a major factor.

  • Invoice factoring is a good option to manage cash-flow gaps.


Compare lenders with NerdWallet's loan tool
We recommend the following ways to finance your business:

Funding option

Why we recommend

Find a lender

Term loan
SMB_Term_Loan_t



  • With a year in business and growing revenue, a term loan can provide a lump sum you can repay over a set period of time.


Compare lenders with NerdWallet's loan tool

Invoice Factoring
SMB_Invoice_Factoring_t



  • You can turn your unpaid customer invoices or receivables into upfront cash. Your personal credit is not a major factor.

  • Invoice factoring is a good option to manage cash-flow gaps.


Compare lenders with NerdWallet's loan tool
We recommend the following ways to finance your business:

Funding option

Why we recommend

Find a lender

Term loan
SMB_Term_Loan_t



  • With a year in business and growing revenue, a term loan can provide a lump sum you can repay over a set period of time.


Compare lenders with NerdWallet's loan tool

Line of Credit
SMB_Line_of_Credit_t



  • With growing revenue and a year in business, a line of credit offers flexible spending and higher credit limits than business credit cards.


Compare lenders with NerdWallet's loan tool

Invoice Factoring
SMB_Invoice_Factoring_t



  • You can turn your unpaid customer invoices or receivables into upfront cash. Your personal credit is not a major factor.

  • Invoice factoring is a good option to manage cash-flow gaps.


Compare lenders with NerdWallet's loan tool
We recommend the following ways to finance your business:

Funding option

Why we recommend

Find a lender

SBA Loan
SMB_SBA_Loan_t



  • As an established business with growing revenue, an SBA loan is a good option if you want low rates.

  • Approval and funding can take longer than other financing sources.


Compare lenders with NerdWallet's loan tool

Term loan
SMB_Term_Loan_t



  • With two years in business and growing revenue, a term loan can offer competitive rates.

  • A term loan is an attractive choice if you want a lump sum paid over a set period of time.


Compare lenders with NerdWallet's loan tool

Line of Credit
SMB_Line_of_Credit_t



  • With growing revenue and two years in business, a line of credit offers flexible spending and higher credit limits than business credit cards.


Compare lenders with NerdWallet's loan tool

Invoice Factoring
SMB_Invoice_Factoring_t



  • You can turn your unpaid customer invoices or receivables into upfront cash.

  • Invoice factoring is a good option to manage cash-flow gaps.


Compare lenders with NerdWallet's loan tool
We recommend the following ways to finance your business:

Funding option

Why we recommend

Find a lender

Line of Credit
SMB_Line_of_Credit_t



  • With growing revenue, a line of credit offers flexible spending and higher credit limits than business credit cards.


Compare lenders with NerdWallet's loan tool

Invoice Factoring
SMB_Invoice_Factoring_t



  • You can turn your unpaid customer invoices or receivables into upfront cash.

  • Your personal credit score is not a major factor.


Compare lenders with NerdWallet's loan tool
We recommend the following ways to finance your business:

Funding option

Why we recommend

Find a lender

Term loan
SMB_Term_Loan_t



  • A term loan is an attractive choice if you want a lump sum paid over a set period of time.


Compare lenders with NerdWallet's loan tool
We recommend the following ways to finance your business:

Funding option

Why we recommend

Find a lender

Term loan
SMB_Term_Loan_t



  • Since most lenders want at least a year in business, you should wait until you reach that milestone to find eligible term loan options.


Compare lenders with NerdWallet's loan tool

Line of Credit
SMB_Line_of_Credit_t



  • With growing revenue, a line of credit offers flexible spending and higher credit limits than business credit cards.

  • We recommend you've been in business for a year to compare line of credit options.


Compare lenders with NerdWallet's loan tool
We recommend the following ways to finance your business:

Funding option

Why we recommend

Find a lender

SBA Loan
SMB_SBA_Loan_t



  • As an established business with growing revenue, an SBA loan is a good option if you want low rates.

  • Approval and funding can take longer than other financing sources.


Compare lenders with NerdWallet's loan tool

Term loan
SMB_Term_Loan_t



  • With two years in business and growing revenue, a term loan can offer competitive rates.

  • A term loan is an attractive choice if you want a lump sum paid over a set period of time.


Compare lenders with NerdWallet's loan tool

Line of Credit
SMB_Line_of_Credit_t



  • With growing revenue and two years in business, a line of credit offers flexible spending and higher credit limits than business credit cards.


Compare lenders with NerdWallet's loan tool
We recommend the following ways to finance your business:

Funding option

Why we recommend

Find a lender

Line of Credit
SMB_Line_of_Credit_t



  • With growing revenue, a line of credit offers flexible spending and higher credit limits than business credit cards.


Compare lenders with NerdWallet's loan tool
Based on your scenario, we don't recommend any financing products for that loan amount. You may be able to find financing for loan amounts less than $50,000.

3. Online alternative lenders

For: People with shaky personal credit, who want fast funding or ease of applying

With traditional banks limiting access to capital, online alternative lenders have seen an increase in popularity. A report by Morgan Stanley predicts they’ll provide 16% of small-business loans by 2020. Online lenders are particularly useful for owners struggling with bad credit or those in need of fast cash. Several of them are able to turn around funding within 24 hours.

Peer-to-peer business lenders are among the alternatives. These lenders cut out the traditional middleman, such as banks, to connect borrowers with individual and institutional investors. The cost of borrowing, however, is much higher; some charge annual percentage rates close to 100%. Still, alternative lenders are an option when a bank says no.

Online business lenders offer a variety of financing options, including term loans, lines of credit and invoice factoring. Take our quiz to find your best options.

4. Crowdfunding

For: Businesses with products that can capture the pubic’s interest

Crowdfunding sites such as Kickstarter rely on investors to help get an idea or business off the ground, often rewarding them with perks or equity in exchange for cash. Although the popularity of these services has increased in recent years (the SBA even offers an online course in crowdfunding), there are caveats. For one, your product or company has to be intriguing enough to catch the eye of multiple investors. In the case of equity crowdfunding, where investors gain a stake in the company, there are strict securities laws and rules to follow for investors and entrepreneurs alike.

5. Credit unions

For: Members who like a personal touch

Like banks, credit unions offer favorable rates and loans backed by the SBA. But unlike banks, credit unions have increased their small-business lending 60% since 2008, according to the National Association of Federal Credit Unions. You’ll likely have to be a member. But the co-op nature of credit unions often ties them to the community, so you may also reap the benefits of more personal relationships and name recognition.

» MORE: Best loan options for women-owned businesses

6. Small business grants

For: Free financing

Funding that doesn’t need to be repaid is the best funding. Small-business grants offer a way for small-business owners to get established or grow, without having to worry about paying back the funds. Typically offered through nonprofits, government agencies and corporations, some grants focus on specific types of business owners, such as minorities, veterans and women. The downside to free financing is that everybody wants it. It will take a lot of work to find and apply to grants, but time spent searching for free money opportunities could pay off in the long run.

» MORE: Sign up for our monthly small-business newsletter

Find and compare small-business loans

NerdWallet has come up with a comparison tool for the best small-business loans to meet your needs and goals. We gauged lender trustworthiness, market scope and user experience, among other factors, and filtered them by categories that include your revenue and how long you’ve been in business.

Jackie Zimmermann is a staff writer at NerdWallet, a personal finance website. Email: jzimmermann@nerdwallet.com. Twitter: @jackie_zm.

Updated July 19, 2017.

SMB_industry-guide-largerCTA1

How to Start a Business

Where to Find Startup Business Loans 2017

Small Business, Small Business Loans

Where to Find Startup Business Loans 2017

Small Business, Small Business Loans
You can trust that we maintain strict editorial integrity in our writing and assessments; however, we receive compensation when you click on links to products from our partners and get approved. Here's how we make money.
Where to Find Startup Business Loans 2017

Money is a big worry when you’re starting a small business.

The growth of alternative lending gives established companies a wide range of business loan options. But entrepreneurs might find it hard to get a small-business startup loan. After all, who wants to lend thousands of dollars to a small business that doesn’t even have revenue yet?

“Nobody does a good job of providing financing to startup businesses because it’s the highest risk out there,” says Charles Green, founder of the Small Business Finance Institute. “You may have big ideas and plans in place, but you haven’t launched yet.”


Get Your Free Personal Credit Score Every Week from NerdWallet

  • Open more doors for financing your business.
  • Set your goals and track your progress.
  • Signing up won't affect your score.

With these considerations in mind, we’ve rounded up half a dozen of the more proven methods of financing a brand-new business:

Startup business loans: Compare all your options

SBA loans, and microloans from nonprofits

The U.S. Small Business Administration has a microloan program that offers up to $50,000 for small businesses and some not-for-profit child care centers. The average SBA microloan is about $13,000. Here’s a list of providers.

The downside of the microloan is the “micro” part: Funding may not be sufficient for all borrowers.

The SBA’s flagship 7(a) loan program also offers financing that borrowers can use to start businesses. But 7(a) loans are tough to get. They typically go to established businesses that can provide collateral — a physical asset, such as real estate or equipment, that the lender can sell if you default. The qualifications are strict, and even if you qualify, the process can take several months.

» MORE: Best loans for working capital

Microlenders and nonprofit lenders can be a less difficult route, especially if you have shaky finances. Many focus on minority or traditionally disadvantaged small-business owners, as well as small businesses in communities that are struggling economically.

Generally, you’ll get solid loan terms from these lenders, making it possible for you to grow your business and establish better credit. That can help you qualify for other types of financing down the road.

Insider tips: Sign up for our monthly small-business newsletter.


[Back to the top]

Friends and family

Perhaps the most common way of financing a new small business is to borrow money from friends or family. Of course, if your credit is bad — and your family and friends know it — you’ll have to persuade them that you’ll be able to pay them back.

In these situations, the potential cost of failure isn’t just financial; it’s personal.

“Business is personal, regardless of what people say,” says David Nilssen, CEO of Guidant Financial, a small-business financing company. “For most people, it’d be difficult to separate the two.”

Trim your list of friends and family to those who understand your plans, and do your best to make certain they’re comfortable with the risks involved.

[Back to the top]

Credit cards

Many small-business owners use credit cards for funding. If your credit isn’t stellar, you might be limited to secured credit cards, which typically have higher fees than regular credit cards.

It’s important to remember, however, that credit cards are an expensive way of financing a small business, particularly if you have bad credit. That’s because card issuers determine annual percentage rates based largely on your personal credit scores. And research has shown that small businesses that rely heavily on credit card financing typically fail.

SHOP SMART FOR THE BEST CREDIT CARDS


[Back to the top]

Personal loans

Many new small-business owners access financing through personal loans, often via a growing number of online lenders. But like credit cards, personal loans usually have high APRs, especially for bad credit borrowers.

For example, companies such as Peerform and Vouch provide personal loans you could use to start a business. Both lenders have a minimum credit score requirement of 600, but their loans have APRs as high as 30%.

Nilssen says small-business owners should consider personal loans “an option of last resort.”

“Where they can work,” he says, “is when a business just needs a small amount of money for things like … early-stage production or buying equipment.”


[Back to the top]

Crowdfunding

Crowdfunding has become a popular way for small businesses to raise money, thanks to such sites as Kickstarter and Indiegogo, which let you solicit funds through online campaigns. Instead of paying back your donors, you give them gifts, which is why this system is also called rewards crowdfunding.

New avenues also are opening up for equity crowdfunding, in which you tap a public pool of investors who agree to finance your small business in exchange for equity ownership. This became an even broader option recently with new securities regulations that allow small-business owners to reach out to mom-and-pop investors, not just accredited investors.

Crowdfunding is good for the entrepreneur “who has a product and wants to test the market and validate the opportunity,” Nilssen says. “No credit necessary.”

» MORE: Best loans for minority-owned businesses


[Back to the top]

Grants

Grants from private foundations and government agencies are another way to raise startup funds for your small business. They’re not always easy to get, but free capital might be worth the hard work for some new businesses.

For example, if you served in the U.S. military, you can access small-business grants for veterans. There are also small-business grants for women.


Startup business loans: Compare your options

Funding sourcesGood option if: More info
Microloans and nonprofitsYou need a small startup loan.
Find lenders at NerdWallet
Family and friendsYou have friends and relations who are comfortable with the risk.
How-to tips from NerdWallet
Credit cardsYou can keep card use to a minimum.
Find cards at NerdWallet

Personal loansYou have a personal credit score of 600+.
Find loans at NerdWallet
CrowdfundingYou're looking to test the market.
See options at NerdWallet

GrantsYou're willing to put in hard work for free capital.
Find grants at NerdWallet

Insider tips: Sign up for our monthly small-business newsletter.

Find and compare small-business loans

NerdWallet’s interactive small-business loans tool allows you to find financing that meets your individual goals. Sort by the age of your business, your credit score and the amount of money you need. Lenders were chosen based on factors including trustworthiness and user experience.

Updated July 19, 2017.

SMB_industry-guide-largerCTA1