There are no federal grants for starting a business. That’s straight from USAGov, and it surprises a lot of new owners. If you’re wondering how to get funding for your small business, the real answer is a mix of personal money, loans, and sometimes investors.
Your plan is simple: figure out what you need, check your credit, and match your situation to the right funding type. This guide walks through each step and shows you which scams to avoid.
This post contains affiliate links. If you sign up through our links, we may earn a commission at no cost to you. Our recommendations are based on independent research and are never influenced by partners.
Last updated: October 4, 2026
Key Takeaways
- Most small businesses fund themselves with savings, loans, or investors, not grants.
- Know your number first. Lenders won’t work with “as much as possible.”
- Check your personal and business credit before you apply.
- Compare APR and total repayment in dollars, not just the monthly payment.
- Upfront fees for “guaranteed” funding are a red flag.
The Short Answer on How to Get Funding for Your Small Business
Most owners combine a few sources. They put in some savings, add a loan, and bring in outside investors only if the plan calls for fast growth.
Free grant money exists for some specific purposes, but it’s narrow and competitive, and per USAGov it isn’t available for starting a business. Small business owners can instead use personal funds, find investors, or take out small business loans.
Don’t plan around a grant.
Step 1: Know Your Number First
Lenders and investors will ask for a specific figure. Start with a simple business plan and a 12-month cash projection.
Know Your Burn Rate
Burn rate is how fast your business spends cash each month. Say you have $60,000 in the bank and spend $6,000 a month more than you earn. Your cash lasts about 10 months.
That number tells you how much runway you have and how much you need to raise.
Add a Cushion
Costs usually run higher than planned. Say your projection says you need $50,000. Adding a 15% to 20% contingency (extra money set aside for surprises) brings your target to roughly $57,500 to $60,000.
That percentage is a common rule of thumb, not a rule from any agency. Adjust it to how unpredictable your costs are.
Decide Whether You Need One Round or Several
A neighborhood bakery may need one round of funding for equipment and a lease deposit. A software company expecting fast growth may need several rounds over the years. Your answer shapes which options make sense.
Step 2: Check Your Credit Before You Apply
Many lenders look at your personal credit, especially if your business is new and has no credit history of its own. Checking first means no surprises at the application stage.
Here’s what most articles won’t tell you: a new business owner’s personal credit often does the heavy lifting. Fix problems there before you apply anywhere.
- Pull your personal credit reports for free. AnnualCreditReport.com is the official site for free reports from the three nationwide bureaus. Check the current free report frequency under bureau policy before you rely on a number.
- Dispute errors. If something is wrong, such as an account that isn’t yours, use each bureau’s online dispute portal. Fixing a genuine error can help fairly quickly. Accurate negative items, like real late payments, generally can’t be removed by disputing them; they fade in weight over time and drop off automatically after a limited period (typically 7 years, up to 10 for some bankruptcies).
- Lower credit card balances if you can. Lower reported balances are one of the faster ways to improve a score, though results vary by person and by scoring model.
- Look at your business credit. If your business already exists, a business credit profile may have started without you knowing. Nav is one tool that lets owners view business credit information and see what lenders may see. Check what’s free and what’s paid before you sign up, and compare it with other options.
New to business credit? Start with what business credit is. Wondering if the two profiles overlap? Read whether business credit affects your personal credit.
Don’t expect a quick fix. A score built on years of history won’t change overnight, and no honest source can tell you how many points you’ll gain.
Step 3: Pick the Right Type of Funding
Bootstrapping (Your Own Money)
Bootstrapping means funding the business yourself from savings or revenue. You keep full control, with no investors or lenders to answer to.
The downside is personal risk. Don’t put in money you can’t afford to lose, and be careful about using retirement savings or running up personal credit cards.
Friends and family can help too, but put the terms in writing. Decide whether it’s a loan or an investment before any money changes hands.
SBA-Backed Loans
The U.S. Small Business Administration (SBA) doesn’t usually lend directly for most loan types. According to the SBA, when a bank thinks your business is too risky to lend to, the SBA can agree to guarantee the loan. That leaves the bank with less risk and makes it more willing to lend.
The SBA’s loans page offers a tool called Lender Match that connects you with lenders who offer SBA-guaranteed loans. For a deeper look, see our guide on what SBA loans are.
Expect paperwork: a business plan, financial statements, and a look at your personal credit.
Microloans and Smaller Loans
Nationwide’s startup funding guide describes a smaller-loan category that typically looks at personal references and collateral instead of your credit score. It lists the pros as being good for people with little business experience or a less-than-stellar credit history.
The cons are that amounts are usually limited to $50,000, interest rates run higher than average, and funding can be slow if you need a lot of cash. This can be a realistic path for owners with thin or damaged credit who need a modest amount.
Traditional Bank and Online Loans
Banks and credit unions offer term loans and lines of credit. A line of credit lets you borrow up to a limit and pay interest only on what you use. Not sure where to start? Compare banks vs credit unions.
Online lenders are often faster but may charge more. Always compare the annual percentage rate (APR), which shows the yearly cost of borrowing including fees, rather than just the monthly payment.
Be extra careful with products that quote a “factor rate” instead of an APR, such as merchant cash advances. They can be very expensive. Ask for the total repayment amount in dollars before you agree.
Business Credit Cards
A business credit card can cover short-term costs. It can also help build a business credit history if the issuer reports to business credit bureaus.
Pay the balance on time and keep it low relative to the limit. Say your card has a $5,000 limit and you carry $4,500. That’s high use of your available credit, which may weigh on your profile. Many owners aim to keep balances well under the limit.
Investors (Angels and Venture Capital)
If your plan is to grow quickly, you can pitch angel investors (individuals who invest their own money) or venture capital firms (funds that invest in high-growth companies). In exchange, you give up part of your ownership, called equity, and often some control.
This path fits a small share of businesses. A local service company usually isn’t a fit.
Crowdfunding
On crowdfunding platforms, many backers give small amounts. Rewards-based crowdfunding usually gives backers a product or perk, not ownership or repayment.
It works best for products people can get excited about, and it takes real marketing effort. Check each platform’s fees and rules before you launch.
Grants: Where to Look and Where to Be Careful
Real grants exist, but they’re usually narrow: for research, specific industries, nonprofits, or particular communities. The U.S. Chamber of Commerce says to begin a federal grant search at Grants.gov, the government’s database of available funding.
Many state and local programs and private foundations also offer grants, so check your state’s economic development office.
Treat any “guaranteed grant” pitch as a red flag. Real government grants don’t require you to pay a fee to receive them, and no official will call to say you’ve “won” one you never applied for.
Pair Your Funding With a Clean Financial Setup
Keep personal and business money separate. A dedicated business bank account makes bookkeeping and taxes easier, and lenders like to see clean records. Setting up a legal entity helps too, as we explain in why you should incorporate your business.
Novo is an online business banking option aimed at small businesses and freelancers. Compare fees, features, and eligibility with a few other banks before choosing. The best account is the one that fits how you actually do business.
Spotting Funding Scams
- Upfront fees for “guaranteed” approval. Be wary of anyone who charges before delivering a loan or grant.
- Pressure to sign today. Real lenders let you read the terms.
- No clear costs. If the lender won’t give you the APR or the total repayment, walk away.
- Credit repair promises. Accurate, timely negative information generally can’t be removed from your credit report by disputing it, and it drops off automatically after a limited period (typically 7 years). Anyone who says otherwise is selling something you don’t need. You can dispute errors yourself for free.
If you believe you’ve been treated unfairly in connection with a consumer financial product or a credit reporting problem, you can file a complaint with the Consumer Financial Protection Bureau (CFPB). Its small business lending material covers the Section 1071 data rule rather than a complaint channel, so verify directly on the CFPB complaint page whether your business lending issue is covered.
What to Expect on Timing
- Credit check and error disputes: pulling reports is immediate. Disputes take weeks, since bureaus generally have 30 days to investigate under the Fair Credit Reporting Act, up to 45 in certain cases.
- Paying down balances: can show up on your next reporting cycle, often within a month or two.
- Building history: late payments and collections fade over years. Steady on-time payments are the long-term fix.
FAQ
Can I get a grant to start my business?
Usually not. USAGov says there are no federal grants for starting a business. Grants.gov lists federal programs that do exist, but they usually serve specific purposes. Don’t build your plan around grant money.
Can I get small business funding with bad credit?
Possibly, but your options may be narrower and cost more. Smaller loans that weigh references and collateral, as Nationwide notes, may be easier to qualify for. Improving your credit first can widen your choices and lower your costs. Approval is never guaranteed.
What is the SBA’s role in a loan?
According to the SBA, it can guarantee part of a loan made by a bank, which lowers the lender’s risk. You apply through the lender, not the SBA. Lender Match on the SBA’s website can help you find participating lenders.
Should I use personal savings or a loan?
It depends on how much you need, how much risk you can take, and what your credit looks like. Savings avoid interest but put your own money at risk. Loans preserve savings but add required payments. Run both scenarios against your cash flow projection first.
How do I know if a lender is legitimate?
Ask for the APR, total repayment cost, and all fees in writing. Legitimate lenders don’t ask for large upfront fees for “guaranteed” approval. Look up the lender’s reviews and any complaints. You might also ask a nonprofit small business advisor to review the offer. SCORE and Small Business Development Centers offer free or low-cost advising.
Your Next Step
Before you apply anywhere, strengthen the credit profile lenders will look at. Start with our guide to building your business credit in 7 steps, then come back and match your number to the funding type that fits. Results take time and vary, so start early.
Disclaimer: The information in this article is for educational purposes only and does not constitute financial advice. Always consult with a qualified financial professional before making decisions about your credit or finances.
