Small Business Funding Options – Equity or Debt

Angels, VCs, bootstrapping loans from banks and alternative lenders


Although bank loans are typically the first form of financing most new business owners think of, they are not the only way to fund your startup.

Here’s an overview of your options.




Signifies ownership and includes:

Does not signify ownership; it is borrowed money that must be paid back, and includes:

Personal savings

Loans from banks and credit unions (typically guaranteed by the SBA)

Investments from family and friends

Community Express Micro Loans

Partners’ contributions

Credit cards (not recommended)

Profits retained in the business


1.   Partners:

If you don’t have adequate capital yourself, consider taking on a business partner who can put money into your startup.

2.   Friends and family:

This can be in the form of debt (a loan) or equity (giving the friend or family member ownership in the business in return for their investment).

3.   Loans:

These could be from banks or credit unions and could include home equity loans.

4.   Credit cards:

If you pay off the balance in full every month, credit cards can work, but if you don’t, this method of financing can become expensive very quickly.

5.   Sale of capital stock:

Depending on the legal form of your business, you may be able to raise capital by selling stock. Be aware this means giving up some ownership.

6.   Grants:

For most for-profit businesses, grants are not available. If you are starting a nonprofit organization, however, grants may be an option. (These are not readily available)

TIP: As a rule of thumb, banks want to see annual “free cash flow” equal to 1.25 times annual debt service requirements. (Debt service means principal plus interest payments.)


1.   SBA guaranteed loans:

These loans are made by banks, but a percentage of the loan is guaranteed by the Small Business Administration, making banks more willing to take a risk on your business.

2.   Department of community and economic development:

Local economic development programs may offer financing assistance.

3.   Department of agriculture and rural development service:

If you are located in a rural area or starting an agricultural-related business, there may be special loan programs available to help you. The SBA also has loans targeting rural entrepreneurs.

4.   Angel investors:

Angels are individual investors, often former entrepreneurs, who invest in promising companies. They may form angel groups and invest together.

5.   Venture capitalists:

Venture capital companies invest in companies that have potential for high growth and a rapid return on investment. They often focus on tech companies and seek large investment opportunities with multiple rounds of funding.

6.   Peer-to-peer loans:

At sites such as ( or Lending Club (, individuals can connect to ask for and lend each other money.


Marj Weber
Marj Weber
Marjorie Weber has been educating entrepreneurs and guiding them in their search for capital for the past 20 years: combining financial literacy workshops with one-on-one mentoring. Marj is currently President of Primed 2 Grow Inc. a company that provides access to capital for both existing and start up enterprises. She has provided term loans and working capital to hundreds of small business in South Florida. She was Chair of SCORE Miami Dade from 2010 to 2014 and served as a financial advisor for SBDC/FIU from 2014 to 2017. She also served as an advisor to the Goldman Sachs 10,000 Small Business Program and the SBA Emerging Leaders Program and provides training for Veterans seeking an entrepreneurial path upon retirement from the service. She has facilitated workshops under the auspices of Miami Bayside Foundation, Little Haiti Cultural Center and several local banks. She commenced her career as a real estate investment banker in New York.