How To Use Other People’s Money To Finance Your Small Business

Crowdfunding, loans, grants, and more can help your business grow

A carpenter uses a tablet.

Halfpoint Images / Getty Images

In a perfect world, you’d have unlimited amounts of cash to cover your small business expenses. The reality, however, is that you likely need help from others. There are several ways you can fund your small business using other people’s money. Below, we’ll take a closer look at some of the most common small business financing solutions so you can determine the right ones for your unique situation.

Key Takeaways

  • There are a number of ways you can use other people’s money to meet your small business goals.
  • Grants, loans, investors, crowdfunding, invoice factoring, and selling your business are several of the many options at your disposal.
  • Factors such as your time in business, credit, and goals will help determine the ideal solutions for your particular venture.

Grants To Fund Your Small Business

Grants typically are distributed by individuals, businesses, and federal, state, or local governments and organizations. The most noteworthy benefit of a grant is that it doesn’t need to be repaid. Once you receive the funds, they’re yours to put toward your business. You don’t have to worry about making monthly payments with interest to pay it back. If you’re a startup or newer business with limited capital, grants can be invaluable.


The Library of Congress provides a rich resource guide to help you find small business grant opportunities, and the U.S. Chamber of Commerce also provides a directory of small business grants.

Loans To Fund Your Small Business

Unlike grants, business loans must be repaid. There are a number of places you can turn to for loans, including friends and family, banks, credit unions, and online lenders. To take out a loan, you should have a solid business plan and financial documents such as balance sheets and income statements. Shop around and compare offers so you can land the lowest rates and most favorable terms.

Investors To Fund Your Small Business

If you go the investor route, you can receive business funding in the form of venture capital investments. In most cases, investors offer venture capital in exchange for an ownership share and an active role in a business. Investors typically focus on high-growth organizations and ask to be on the board of directors. You can look for individual investors or “angel investors'' and share your business plan with them.

Crowdfunding To Fund Your Small Business

Crowdfunding is when a “crowd” rather than one or two investors fund your business. Typically, crowdfunders expect a “gift” from your business, such as a product you sell or a meeting with a business owner. While there are many crowdfunding websites you can use, some of the most popular, reputable options include Kickstarter, GoFundMe, and CircleUp.


In most cases, you don’t have to repay the funds you receive from crowdfunding.

Invoice Factoring To Fund Your Small Business

Invoice factoring might make sense if you’re facing cash flow issues and your customers tend to pay you late. With this option, you sell all or a portion of your unpaid invoices to a factoring company. The factoring company will then give you immediate cash. Once they collect payments from your customers, they’ll distribute the remaining amount minus a fee.

Selling Your Business To Fund Your Small Business

At some point, you may decide to merge with another business or sell your business to a larger organization. Since a larger business will likely have more capital and resources, it can help you grow your business. Another option is to sell your business for a profit and use the proceeds to finance a different venture.


To officially sell your business, you’ll need to prepare a sales agreement, which should be reviewed by an attorney.

Frequently Asked Questions (FAQs)

What financing options do small business owners have?

As a small business owner, you have a number of financing options at your disposal. You might want to consider grants, small business loans, investor funding, crowdfunding, and selling your business. The ideal solution will depend on whether you’re a startup or established venture as well as your unique financial situation and goals.

How do you get a small business loan?

To get a small business loan, you’ll need to decide on the type of loan you prefer and how much money you need. Then, it will be your responsibility to create a business plan and collect financial documents such as balance sheets, income statements, and cash flow projections. Next, shop around to figure out the ideal lender and product.

Was this page helpful?
The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.
  1. “Grants 101.”

  2. U.S. Small Business Administration. “Fund Your Business.”

  3. Southern Bank Company. “What Is Invoice Factoring?

  4. U.S. Small Business Administration. “Close or Sell Your Business.”

  5. Citizens Bank. “How To Get a Small Business Loan.”

Related Articles