How to Raise Money for a Business Without a Loan

Discover different ways to fund your business without taking on debt. Keep on reading to explore several alternative financing methods

June 14, 2024
How to Raise Money for a Business Without a Loan

A record five-and-a-half million new business applications were submitted in 2023.1 Among these were manufacturers of potentially life-saving technology, tax preparers, and construction companies that may one day build the world’s tallest skyscrapers. These new companies couldn’t be more different. But something they all have in common is that, before launching, they each likely had to figure out how to raise funds for the startup. 

The many ways these millions of businesses raised startup capital, however, may be as different as their unique functions. This is because, while it may be a popular way, a small business loan isn’t the only way to raise funds –– but finding the funds required to take your startup business from daydream to day job without completing a bank loan application will take a little creativity and a well-thought-out plan. If you’re wondering how to raise money for a business without a loan, consider the options outlined below.   

Key Financial Considerations for Starting a Business

So, how much money do you need to start a business? Technically, the only money needed to legally start a business is the amount it takes to register an LLC or corporation (generally around $200). With that said, different types of businesses will require more startup capital to function. For a small, fully remote creative agency, this cost may only include a couple of computers and software licenses –– which you may already have. But for a brick-and-mortar retail store, upfront costs like rent and merchandise can exceed $50,000. 

This short list of annual costs by business type should give you an idea of how much startup cash you’ll need to raise.

  • Arts, Crafts, or Entertainment –– $12,000–$30,000
  • Construction –– $38,000
  • Food Service –– $375,000+

These figures are rough estimates, and the actual cost will be determined by the size of your business (both in terms of employees and professional scope) and your physical location.2 Before you begin raising funds, figure out precisely how much you’ll need to better understand your options. 

Grants and Competitions

There may be “no such thing as free money,” but for new and growing businesses, grants and small business competitions can be the closest thing to it. But while each of these are paths to startup funding, they take dramatically different routes.  

Government Grants

The federal government offers small business (SBA) loans, which can be a better alternative than private loans, but investment programs like the Small Business Innovation Research (SBIR) program can provide a loan-free cash infusion for businesses looking to affect positive change through emergent or innovative technology.3 If you’re a non-STEM business looking for a government grant, however, you’ll have to consult resources in your state to see what local programs are available. 

Business Competitions

While Shark Tank may immediately come to mind when you think of a business competition, most new-business cash infusions happen off the air. Sometimes they even happen over the web. Pitch competitions are a common way for entrepreneurs to find investors –– or at the very least, gain exposure –– with events like the Startup World Cup awarding a $1,000,000 investment or, in the case of the TechCrunch Disrupt, an equity-free $100,000. Keep in mind that there are entry fees for these competitions. Depending on the size of your business, the cost of entry alone may outweigh the potential benefits. 

A note on grants and competitions: In the case of both small business grants and competitions, your chances of receiving startup funding will come down to your business plan and pitch –– and competition is fierce. The better you prepare and the more comprehensive your plan is, the better your odds will be. 

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Equity Financing

Equity financing is another way to raise funds for your business. By allowing a potential investor to become part owner, you can empower your growth while sharing your success. 

Angel Investors

Generally speaking, angel investors and traditional lenders are on complete opposite ends of the spectrum. Whereas banks and other lenders lend money with every intention of recouping their investment, angel investors are taking a financial risk with merely the highest of hopes the endeavor pays off –– putting their own working capital on the line in the process. In exchange, angel investors typically receive an equity or ownership share, which will pay off if and when the business takes flight.4 The benefits of an angel investor are not purely financial. These investors can also offer valuable advice, professional experience, and industry connections that can propel a business forward. 

Venture Capital

Unlike angel investors, who assume the risk that comes from pouring their own money into a fledgling business, venture capital firms invest on behalf of a fund. Therefore, these firms have the health of a fund (and shareholder value) to consider. Beyond these differences, venture capital firms can provide a similar type of financial support to growing businesses on a much larger scale. Venture capital funds are pooled investment vehicles –– managing money from investment companies, individuals, and pensions –– that purchase equity stakes in startups and small- to medium-sized enterprises exhibiting strong growth potential. Due to the highly competitive nature of venture capital, businesses hoping to receive a VC investment will need a comprehensive, clear business plan and a capable management team. 

A note on equity financing: Venture capital and angel investors stand to offer the greatest benefit to established and growing businesses, but they can also assist in helping budding entrepreneurs launch new ones. In either case, establishing a clear vision for your venture can convince investors that your business is worth hitching a cash-filled wagon to. 


As we saw during the pandemic, there are times when businesses must rely on support from their communities to thrive—or even just survive. Why not, then, lean on these communities to get a startup business off the ground? When properly wielded, crowdfunding can be a powerful tool for aspiring entrepreneurs, clearly demonstrating the impact that community can have on a business. 

Online Platforms

Kickstarter. Indiegogo. GoFundMe. These online platforms with slightly silly–sounding names allow users to fund ideas, individuals, and causes they believe in, receiving a product or supporter-exclusive reward in exchange. This may be an established business in need of a lifeboat or an entrepreneur with a novel idea but no means to execute it. Regardless of the cause, these crowdfunding platforms prove there’s strength in numbers. In fact, you’ve probably used a product or supported a business that got a boost (or got its start) using crowdfunding. The card game Exploding Kittens and the now-Meta-owned Oculus VR headset, for example, both raised millions on Kickstarter.5

Online crowdfunding has an additional benefit: it can serve as a potent marketing tool. Supporters of your venture are personally invested in its success –– and the more friends and strangers they can recruit for the cause, the more likely your business will be to succeed. With crowdfunding, you can also consistently gauge consumer interest, making this an effective survey platform as well. 

Equity Crowdfunding

Similar to platforms like Kickstarter, equity crowdfunding relies on the generosity and foresight of contributors. Rather than receiving an early version of a product as a token of their support, however, contributors get a stake in the company. Through this approach, aspiring or existing small business owners upload their pitch profiles to online platforms like SeedInvest and CircleUp –– in addition to financial statements and any necessary information –– to be reviewed by potential investors.6 When you use equity crowdfunding to raise money for your business, you’re selling shares directly to these investors. 

A note on crowdfunding: Online crowdfunding platforms are tools for budding businesses, but they’re also businesses themselves. As such, they generally charge both funding fees and processing fees. Kickstarter’s fee is five percent, and CircleUp takes between three and eight percent of the amount raised. In many cases, however, you won’t be on the hook for a fee if funds aren’t raised or your fundraising goal is not reached. 

Truehold’s Sale-Leaseback As An Option for Funding Your Business

As you can see, personal and small business loans are far from the only means of raising funds to launch your dream. You can go the VC or angel investor route, pitching your idea to investors and trading away ownership bit by bit. Or you can harness the power of the World Wide Web and raise funds through sites like Kickstarter and CircleUp. But before you polish your pitch deck and log on to a crowdfunding platform, you might want to look a little closer to home for funding. Much closer, in fact.

Truehold’s sale-leaseback allows you to sell your house and still live in it, in exchange for your home equity, then continue living on the premises as a renter. This equity can be used to fund your dreams, such as launching your business––and maybe even planning a getaway to clear your head before the really hard work starts. And when it comes time for you to buckle down and get your business off the ground, we’ll be taking stress off your plate by handling productivity-draining activities like routine maintenance so you can focus on this exciting next step. 

Homeowners in 10 states and counting have used Truehold to free up their home equity and chase their dreams. To learn how you can join them, connect with one of our advisors today.   


  1. U.S. Chamber of Commerce. Map: New Business Applications Surge Across the Country. 
  2. Bankrate. Average cost of starting a small business. 
  3. Small Business Innovation Research. 
  4. Investopedia. Angel Investor Defined and How It Works. 
  5. Forbes. Ten of the Most Successful Companies Built on Kickstarter. 
  6. NerdWallet. What Is Equity Crowdfunding? How It Works, Where to Get It. 

Nicolas Cepeda headshot
Written by
Nicolas Cepeda
Financial Analyst at Truehold - A Specialist in Real Estate Finance
Nicolas Cepeda specializes in financial analysis and strategic portfolio management, with a keen focus on innovative residential real estate solutions. He leverages this expertise to cover pertinent topics in the real estate and financial sectors.
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Truehold's blog is committed to delivering timely and pertinent insights in real estate and finance, purely for educational and informational purposes. Crafted by experts, our content is thoroughly reviewed to guarantee its accuracy and dependability. Although designed to enlighten and engage, our articles are not intended as financial advice and should not be the sole basis for financial decisions. Our stringent editorial practices ensure the integrity of our content, empowering our readers with valuable knowledge.

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