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What alternatives to loans are there for financing a new business?

On Behalf of | Aug 16, 2016 | Business Formation & Litigation |

One of the major decisions for a person as they are starting a new business is how to finance the business as it is starting up. Among the things that typically go along with starting a business are lots of costs.

One of the well-known sources for new business financing are bank loans. However, some entrepreneurs may have a goal of starting their business without taking on any loans. Such a goal could be driven by many things, such as a desire to not saddle their business with debt before it gets off the ground or fear of what impacts a loan might end up having on their personal financial situation if the business doesn’t take off the way they hope.

Now, it is possible for a new business to be financed without loans. There are several financing alternatives to bank loans out there that entrepreneurs could use as their business is starting off, including:

  • Crowdfunding.
  • Bringing on a partner.
  • Bringing on an investor.
  • Seeking funds from family or friends.
  • Reinvesting early profits.
  • Using personal savings.
  • Continuing to do other work, and just have the new business be part-time to start with. In such a situation, a person could use the money they earn from their other work to help fund the business.

What could also help with keeping a newly started business loan-free is engaging in cost-cutting measures. This could include focusing one’s new business on a low-investment idea, sticking to just what costs are necessary as the business is getting started and looking into low-cost alternatives for the various typical start-up costs for a business.

Of course, there are many other big issues that go along with starting a company beyond financing. This includes the legal matters related to forming a business. As with financing, when making decisions regarding these issues, it is important for an entrepreneur to keep their particular goals in mind. Business law attorneys can assist business owners during the business formation process with understanding what particular options related to the legal matters connected to the starting of their business might fit best with their particular goals.

Source:, “You Can Do It: How to Start a Business Without Loan,” Mehul Rajput, Aug 12, 2016