If becoming an entrepreneur has always been a dream of yours, there's probably one key reason why you haven't followed your dream: money. Some businesses may require very little capital while others may need a lot. Here are a few of the most popular ways to fund a startup's first year.

The Bank
When people need money, the first place they think of is a bank. Since the 2008 and 2009 financial crisis, even existing business owners have found it difficult to secure bank loans. Although lending to larger companies has improved, small businesses or startup loans have not recovered as well. If you're turned down by a bank, try a credit union. Credit unions are non-profit community oriented institutions similar to banks. Credit unions are more likely to consider you for a startup loan.

SEE: 6 Benefits Of Using A Credit Union

The Small Business Administration
The SBA is a U.S. government-sponsored agency dedicated to the growth of small businesses and entrepreneurs. Through local banks, the SBA offers startup loans to entrepreneurs that are easier to qualify for than traditional bank loans. The loans are easier to get because most of the loan is guaranteed by the SBA which puts the bank at little risk.

Although there are no startup grants available from the Federal government, some states and non-profit associations offer grants to entrepreneurs who are starting certain types of businesses. If you're planning to open a non-profit or ecofriendly business, there are numerous grants available. Many other types of businesses qualify for grants as well.

SEE: Canadian Grants And Tax Credits Fund Education

In 1956, a hardware store manager converted a warehouse into a place where business owners could rent space and gain access to experts willing to give out business advice. One of his early tenants was a chicken processor. After seeing little chicks running around the warehouse, he called his idea an incubator.

Today, incubators are often nonprofits designed to teach people to be entrepreneurs as well as help them to sustain their business through the tough early years. Often, incubators are locally sponsored with the hopes of drawing new talent to the area. Not only do business owners receive advice, funding often comes with it.

Mom and Dad
Mom, Dad, other family and friends have long been a popular funding option. Although it's awkward asking people you know for money, a study found that friends and family gave three times more than venture capitalists and angel investors. Instead of asking for a loan, consider offering a stake in the company.

Recent legislation has opened crowdfunding to most future entrepreneurs. Crowdfunding allows large amounts of people to contribute smaller amounts of money to your business. Although the rules regarding crowdfunding are still in development, most believe that the Internet will be the main vehicle used to secure funds.

Crowdfunding won't be appropriate for everybody and the rules might make this too complicated for some business owners. For others, this could represent a large source of funding. Until the United States SEC publishes the rules, crowdfunding still remains illegal.

SEE: How To Use Crowdfunding To Start Your Business

The Bottom Line
Starting your business might not take a lot of capital, but keeping it open through the first couple of years may be difficult without some extra financial help. Consider all options before accepting funds. Loans involve paying interest and sometimes require giving up some of the control of your business.

Related Articles
  1. Entrepreneurship

    4 Government Grants for Small Business Owners

    Discover common resources available to and used by small business owners and entrepreneurs in funding initiatives through government grants.
  2. Stock Analysis

    How Yelp Adds Value to Local Businesses

    Understand how the Yelp platform operates and how it adds value to the business world. Learn about the top five ways Yelp helps small businesses.
  3. Investing

    The Top Businesses Nurtured By Y Combinator

    We look at the top startups that were incubated at Y Combinator, one of the world's most popular business incubator firms.
  4. Investing Basics

    The Economics Behind Marathons

    Marathons are growing in popularity at a record pace. Entry into these events commands a hefty price, but it's nothing compared to the organizational costs.
  5. Personal Finance

    Tips To Improve Chances Of A Small Business Loan

    Enhance your small business loan eligibility by keeping these important tips in mind.
  6. Investing

    How To Create a Winning Elevator Pitch

    Whether you are talking to potential investors, partners, customers or employees, the skill of being able to concisely summarize your business is critical.
  7. Professionals

    How Advisors Can Carve Out a Social Media Niche

    Social media is a great way for financial advisors to build a brand and potentially generate leads if it’s properly used. Here are some tips.
  8. Investing

    How Aliko Dangote Became the Richest African

    An overview of how Aliko Dangote turned a local commodities trading business into a billion-dollar conglomerate.
  9. Stock Analysis

    How To Start Your Own Private Equity Fund

    Here's a how-to guide on starting on starting a private equity firm.
  10. Professionals

    4 Ways Companies Can Relieve Workplace Stress

    Workplace stress can cost companies tons of money in lost productivity and absenteeism. Some of that is out of their control, but often they are the cause.
  1. Who do hedge funds lend money to?

    Many traditional lenders and banks are failing to provide loans. In their absence, hedge funds have begun to fill the gap. ... Read Full Answer >>
  2. Can mutual funds invest in private equity?

    Mutual funds can invest in private equity indirectly by buying shares of publicly listed private equity companies, such as ... Read Full Answer >>
  3. Can mutual funds invest in private companies?

    Mutual funds can invest in private companies, which may come as a surprise to many investors. It is rare for a fund to have ... Read Full Answer >>
  4. What types of capital are not considered share capital?

    The money a business uses to fund operations or growth is called capital, and there are a number of capital sources available. ... Read Full Answer >>
  5. What does residual value represent in a private equity investment?

    It is common to see a private equity investment's net asset value, or NAV, referred to as its residual value, since it represents ... Read Full Answer >>
  6. Can I buy insurance to reduce unlimited liability in a partnership?

    Partnership insurance is actually quite common. Most of the time, partners buy insurance to safeguard against the possibility ... Read Full Answer >>

You May Also Like

Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!