Creative Financing for Entrepreneurs: Alternatives to Business Startup Loans

Not everyone can get a business startup loan right away. In the meantime, there are several alternatives to business startup loans that entrepreneurs can tap into. 

Friends and Family

Asking people to join in on a business venture is one way to raise some startup capital without a business startup loan. There are a few considerations before this method should be pursued, however:

  • have a good business plan and good personal finances is one way to convince others that your business is a worthy investment

  • personal relationships can become strained if the business falters

  • those that lend money might want a say in how the business is run
Credit Cards

Credit cards are another way to get startup funds for a business in the absence of a business startup loan. This is a source readily available to most people.

  • Understand the terms carefully. Late payments can result in higher interest rates.

  • If the business fails, there will still be the balance to pay off on the credit card. Inability to pay this can hurt personal credit.
Personal Savings

Saving up can build up the money needed to start a business without a business startup loan.

  • Having a part-time job can provide some additional money while the new business is getting off the ground.

  • Saving up before starting a business will make the transition easier.

  • Personal savings could be lost in the short-term if not the long-term.
Work From Home

While this won't provide money, it can save money on a lease or real estate purchase until a business owner can build up the business enough to apply for a business loan.

  • Using existing home space and office equipment will cut down on startup costs.

  • A blurred line between home life and work life makes it more important to maintain a focus on efficiency.
Home Equity Line of Credit

Borrowing against the value of a home can provide a nice chunk of needed capital without a business startup loan.

  • A homeowner who has owned a home for a long time may have quite a bit of equity in the home.

  • The home is up for collateral, so is at risk of being lost if the business fails.

Some people make it their job to invest in new businesses that they think will be profitable. 

  • This includes venture capitalists and angel investors who may be looking for something different than lenders giving a traditional business startup loan.

  • This kind of funding can be very competitive to get.

  • Those that lend money may want a say in choices the business makes.