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Start Your Business Without a Bank Loan

Start Your Business Without a Bank Loan

Lots of hopeful entrepreneurs have an idea that could make a great business, but unfortunately, lack the money needed to get it started. While the logical next step would be to look to banks to launch a business, most new establishments have a hard time getting funds using this route. Banks are often reluctant to lend funds to individuals who have no proven track record of being able to turn a profit. As new business owners are deemed high-risk, they must find other avenues to launch their startup. Below are a few worth considering.

Online Lenders

Bank loans come with a steep set of requirements. Most will require things like an appraisal and title insurance. They will also require collateral and a business plan before approving a loan. Online lenders, on the other hand, don’t require as much from new business owners. If you’ve been in business for at least a year, can prove you own the business, and have a reasonable credit background, you can get small business loans from trusted lenders online. With quick applications and even faster approval decisions, entrepreneurs can have funds within a few days.

Angel Investors

If you really have a great idea that you believe the public needs to experience, asking others to invest in your business is another option. Angel investors are individuals who invest in startup or early-stage companies they believe in. While this can be a great way to raise capital fast, it is not without some responsibility on your end. You’ll be required to pay 20 to 25 percent return on their investment.


Crowdfunding to launch a small business has become increasingly popular for entrepreneurs. Sites like Kickstarter and Indiegogo provide a platform for hopeful business owners to pool money from several individuals. Unlike angel investors, however, those who donate money through crowdfunding sites are not looking for you to repay them. This is essentially free money from those who believe in your idea. An effective marketing campaign for your crowdfunding efforts could help you to reach millions of potential investors in a matter of seconds and reach your financial goal.


Another option for raising money for your business idea that doesn’t have to be repaid is to apply for grants. The Small Business Administration and other organizations offer grant opportunities for businesses in various niches. The funds can be used to start the business, pay off business debt, and/or to cover operational expenses. There are strict requirements, so you’ll want to review each application thoroughly before applying.

Business Credit Cards

If you have reasonably good credit, an option for covering the cost of smaller expenditures like supply purchases would be a business credit card. Easier to qualify for than a loan, business credit cards have considerable credit limits allowing you to build company credit while paying for things you need. They also often come with perks like cash back, which can be beneficial for saving your business money.

Home Equity Loan or Line of Credit

If you’ve lived in your home for a while and have accumulated equity, you can use this to start your business. Eligible applicants need to have a good or fair credit history and at least 20-30% equity in their home. If approved, they can borrow as much as 80 to 90% of their home’s equity, which is usually repaid over the next 5-15 years. Keep in mind, there are associated fees and costs, and failure to repay the loan could result in the loss of your home, so this should not be done without careful consideration.

Dig Deep

If you have no other avenue to take, don’t give up on your dream to start a business. As most business startups don’t require much capital in the beginning, you may find that you can fund the idea yourself until you’re more established. Dig deep into your finances to see where you can free up money. Whether you stop eating out, reduce your energy bill, ditch the cable, or decide to have a yard sale and get rid of some old things, it can all add up and help you fund your company.

Bank loans are the common next step when you need to borrow money, but they’re very hard to get approved for. If you want to launch a new business idea, try the avenues listed above. Many of them are a lot more affordable and less strenuous to apply for than traditional bank loans, which saves you money and a headache in the long run. As your business gets established and you find a need for more money, then you might consider a bank, who’d be more inclined to work with a successful brand.

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by Rebecca Jones // Contributor to Businessing Magazine.

Opinions expressed by contributors are their own.