4 ways to fund your brand-new business

By Courtenay Stevens

It takes a lot of money to start a business, and most people aren’t able to cover all their startup costs with just their personal savings. The problem? It’s extremely hard to secure external funding if you don’t already have at least one year of business credit history.

It makes sense – small-business loans involve more risk, and studies show about 20% of startups don’t survive their first year. But this does create a serious dilemma for business owners: How do you get the funding you desperately need during the beginning stages of your business when you don’t have any business credit history?

Below you’ll find a few options to get you started.

FYI: Merchant cash advance providers advertise their services as a valid financing option for businesses with no credit history, but they’re not included in this list due to their highly predatory lending strategies. We recommend entrepreneurs steer clear in favor of one of the safer options below.

Secured credit cards

Yes, most business credit cards require businesses to have at least one year of credit history to be approved. So for many startup businesses, a traditional credit card isn’t a practical financing option.

Fortunately, a couple types of credit cards exist for businesses that don’t have a year’s worth of financial history.

Secured credit cards work just like a normal business credit card: you charge expenses to your account, then make monthly payments to lower your balance. The difference is secured credit card lenders require an upfront cash deposit on your card.

The money from your deposit basically acts as collateral, which your lending provider can seize if you fail to make payments on your card. This safeguard lowers the risk for your provider, so you’re more likely to be approved even if you don’t have a year’s worth of credit history.

Business charge cards

Business charge cards also work just like regular business credit cards (you charge expenses to your account, then pay back the money you’ve spent). But instead of requiring an upfront deposit, business charge cards feature very strict repayment terms.

Rather than allowing you to gradually pay back the money you’ve borrowed, business charge cards require that you pay your balance in full at the end of each billing period. This limits the amount that you can charge to your card in a given month, which naturally protects your lending provider in the event your business goes under.

For most startup businesses, these repayment terms make business charge cards a less-than-ideal financing solution. Unless your business already has a steady cash flow, it’s unlikely that your brand-new company would be able to pay back the balance on your card in full every month.

However, if you’re running a new business and just need a little temporary financing to cover a one-time cost or inject a little more cash into a current marketing campaign, business charge cards can be a great way to get the financing you need to grow your business.

Crowdfunding websites

Crowdfunding sites like Kickstarter and GoFundMe have become increasingly popular among entrepreneurs looking to secure their business financing without going through traditional lenders. And for good reason.

While a few types of crowdfunding differ, most sites work the same way: businesses come up with a product and set a financial goal. Consumers can then choose to contribute money to the campaign, usually in exchange for some sort of reward that corresponds to the level of their investment.

Using crowdfunding, many businesses are able to raise the money they need to cover their startup costs—no credit history needed.

That being said, crowdfunding isn’t for all businesses. If you’re running a restaurant or real estate agency, for example, it may be difficult to offer compelling rewards for investors who live outside your area. That means you’ll get fewer donations. Plus, some crowdfunding sites don’t pay you any of the money donated unless you meet your financial goal.

But if you’re trying to raise money to build a full-fledged company off the back of a compelling product, crowdfunding may be just what you need.

Venture capitalists and angel investors

Another option if you’re seeking financing but have less than a year’s worth of business credit history is to pitch your business to venture capital groups and angel investors.

Venture capitalists invest money on behalf of their clients. These investment organizations are large and have a lot of money to throw around, but because venture capitalists represent the financial interests of their clients (rather than themselves), they are also extremely cautious about which businesses they choose to back.

Angel investors, on the other hand, are individuals who make investments on their own behalf. Because they’re individuals, they tend to invest less than a venture capitalist group. But they may also be more willing to provide mentorship, and they may have more industry-specific expertise.

Granted, private financing has its pros and cons. For starters, private investors may have more control over your day-to-day operations than a bank or loan provider. Some investors may even require you to hand over shares in your business in exchange for the financing you need. Down the line, that may give you less control over the direction of your business.

The bottom line

Even if you haven’t had time to build your business’s credit score, there are plenty of ways to secure the financing you need. To choose the right financing option for you, it’s important to consider the amount of money you need to borrow, your current cash flow, your product offerings, and the stakes you’re willing to hand over to your investors.

And remember: there is no one-size-fits-all solution. Chances are, you’ll need to secure financing from multiple lending providers to cover your start-up costs. But any of the options outlined above should get you well on your way to building your business credit and getting your company off the ground.


As the daughter of two entrepreneurs, Courtenay Stevens developed an interest in business at an early age. Now a contributor on Business.org, she specializes in financing, security, and websites for businesses. Courtenay is passionate about helping entrepreneurs save money on the tools, products, and services they need to start a business. You can read more of her business startup advice on CareerMetis.com, Business.com, and BlogWorld.com.

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