Business Funding

Startup Funding Guide: How to Fund a New Business in 2026

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Chris Scarfo, Co-founder, Lending Gurus
Ten years in business banking before co-founding Lending Gurus. · Updated Nov 2, 2026

Updated November 2, 2026. Written by Chris Scarfo. Read my editorial policy.

Just opened your doors, or still pre revenue? Here is every realistic way to fund a startup, what each one asks of you, and how to set yourself up for bigger options later.

Quick answer: Most new businesses fund their first year with a mix of owner money, SBA microloans (up to $50,000), equipment financing, business or personal credit and, now and then, grants. A 7(a) loan is possible for a startup, but the SBA requires you to put in at least 10% of the project cost. Start small, keep clean records and your options grow once you have revenue history.

Key takeaways

Many business lenders look for time in business and steady revenue, so brand new companies usually start with options tied to assets, personal credit, or community programs.
SBA microloans go up to $50,000, and the SBA says the average is about $13,000 (SBA).
The SBA itself does not give grants for starting or expanding a business (SBA), so treat grants as a bonus, not a plan.
Clean bookkeeping and a separate business bank account from day one make every later application easier.

Hi, I’m Guru. Startup funding is the question I hear most, and it is also where people get the most mixed messages. The honest version is simple: when a business is new, there is less history for a lender to judge, so the options lean on something else. That something might be equipment, your personal credit, or a nonprofit lender whose mission is helping new owners. Below I walk through each path, what it costs you in risk, and where it fits. Lending Gurus does not lend money or make credit decisions. I help you understand options and connect with partners, and those partners decide.

Why startups have fewer options at first

A lender’s main question is whether a loan will be repaid. For an established company, the answer comes from bank statements, tax returns, and years of sales. A startup has little of that yet. So lenders look for other comfort: collateral they can rely on, a personal credit history that shows how you handle debt, or a program designed to absorb more risk in exchange for a public or community goal. Knowing that tells you where to look first.

SBA microloans

The SBA microloan program provides loans up to $50,000 to help small businesses start up and expand. The money is not lent by the SBA directly. It flows through intermediary lenders, which are usually nonprofit, community based organizations. According to the SBA microloan page, the average microloan is about $13,000, the maximum repayment term is seven years, and rates vary by intermediary.

Microloans can cover things like working capital, inventory, supplies, furniture, fixtures, machinery, and equipment. They cannot be used to pay existing debt or buy real estate. Many intermediaries also ask you to take part in training or planning help, which is useful when you are new. Requirements differ by intermediary, so expect some to ask for collateral or a personal guarantee.

For a wider look at how the SBA programs compare, including 7(a), 504, and Express, read my SBA loans overview and the SBA loan programs comparison.

Equipment financing

If your startup needs a truck, an oven, a printer, or a machine, equipment financing is often one of the most reachable options. The equipment itself usually secures the financing, which gives the lender something concrete to rely on even when your business history is short. That is why some equipment financiers work with newer companies when other lenders will not.

Points to weigh:

You may need a down payment, and newer businesses often see higher rates or shorter terms.
The term generally should not outlast the useful life of the equipment.
Leasing and financing are treated differently for taxes. The IRS explains depreciation and the Section 179 expense election in Publication 946. Talk to a tax professional before you count on a deduction.

My heavy equipment financing guide goes deeper on terms, down payments, and what partners review.

Business credit cards

A business credit card is a practical tool for small, recurring costs like software, supplies, and travel. Approval for a new business usually leans on your personal credit, and most issuers ask for a personal guarantee, which means you are responsible if the business cannot pay.

Two cautions. First, card rates are typically much higher than installment loans, so carrying a balance month to month gets expensive fast. Second, some consumer protections that apply to personal cards may not apply the same way to business cards. The CFPB credit card resources explain the rules for consumer cards, and it is worth reading your business card agreement just as closely.

Options based on personal credit

Many founders fund the first months with personal loans, personal credit lines, or savings. These can be quick to access because the decision rests on your own credit and income rather than the business. The tradeoff is clear: the debt is yours personally, whether or not the business succeeds.

Before you go this route:

Pull your credit reports for free at AnnualCreditReport.com, the site the CFPB points to, and fix any errors.
Borrow only what a realistic plan can repay, even in a slow year.
Keep business and personal spending in separate accounts so your records stay clean.

Guru’s Take

If I was starting out, I would match the money to the job. Equipment financing for equipment, a microloan for early working capital, and a credit card only for costs I can pay off each month. Personal debt can bridge a gap, but I would keep it small and short, because it follows you home if the plan changes. And I would open a business bank account on day one. Six months of clean deposits will do more for your next application than almost anything else.

Can a startup get an SBA 7(a) loan?

Yes, but the bar is higher than most people expect. Under the SBA rulebook (SOP 50 10 8), a startup is a business that has had revenue from its main operations for one year or less, and it has to inject at least 10% of total project costs. Project costs means everything it takes to open the doors, not just the part the loan covers. Since March 1, 2026, all owners also need to be U.S. citizens or U.S. nationals living in the U.S. Lenders still want a solid plan, relevant experience and a personal guarantee from 20% owners. More on that in my guide to SBA loan requirements.

Microloan details worth knowing

Per the SBA, microloans are made through nonprofit intermediary lenders, interest rates generally run between 8% and 13% depending on the lender, and the intermediary sets the terms. Microloans cannot be used to pay off existing debt or buy real estate. They are a good fit for inventory, equipment and working capital.

Worked example: a simple first year funding plan

Say you are opening a small service business and need about $50,000: $25,000 for equipment, $15,000 for working capital and $10,000 for buildout and deposits. One realistic way to stack it:

$10,000 of your own savings, which also shows lenders you have skin in the game
$25,000 of equipment financing, where the equipment itself backs the deal
$15,000 from an SBA microloan for working capital

Then check the payments. A $15,000 loan at 12% over five years runs about $334 a month. Add the equipment payment and make sure your early months can cover both. My business loan calculator does this math for any amount, rate and term.

Grants

Grants do not need to be repaid, which makes them attractive, but they are competitive and usually tied to a specific purpose. The SBA states plainly that it does not provide grants for starting and expanding a business. Federal grants that do exist are mostly for research, nonprofits, and specific programs, and they are listed at Grants.gov. Federal research grants for small businesses run through the SBIR and STTR programs.

For most local businesses, the better leads are state and city economic development offices, local chambers, and community organizations. Be wary of anyone who charges a fee to “guarantee” a grant. Real grant programs do not work that way.

What lenders look at

Every partner sets its own criteria, but these are the factors that come up most often:

Time in business. Many lenders want some operating history, and more options tend to open up as your business ages.
Revenue and cash flow. Bank statements show whether money comes in steadily enough to cover a payment.
Personal credit. For newer businesses, your personal credit history often carries a lot of weight.
Collateral. Equipment, inventory, or other assets can reduce the lender’s risk.
Industry. Some industries are seen as higher risk, and terms can reflect that.
Existing debt. Other payments you already owe affect how much more you can take on.
A clear plan. Especially for microloans, a simple plan showing how the money will be used and repaid helps.

The Federal Reserve’s Small Business Credit Survey tracks how small firms apply for financing and how those applications turn out, and it is a good read if you want a wider view of the lending landscape.

How to unlock more options over time

The first year is about building a record. A few habits make a real difference:

Run all business income and expenses through a business bank account.
Keep bookkeeping current every month, not just at tax time.
File business tax returns on time. Lenders often ask for them once you have them.
Pay every bill on time, including any early loans or cards.
Register your business properly and get an Employer Identification Number from the IRS if you need one.

As your history grows, options like working capital, lines of credit, and term loans can become more realistic. The timing and terms are always up to each partner.

Free help while you plan

The SBA’s resource partners, including SCORE mentors and Small Business Development Centers, offer free or low cost counseling. You can find one near you through the SBA local assistance finder. A good advisor can help you build the plan and records that lenders want to see.

FAQ

How much startup funding can I realistically get?

It depends on your credit, savings and plan. Brand new businesses often start in the $5,000 to $50,000 range through microloans, equipment financing and credit cards. Bigger amounts usually need an SBA loan with at least 10% owner equity or some revenue history.

Can I get startup funding with bad credit?

It is harder. Microloan intermediaries and community lenders tend to look at the whole picture, and equipment financing leans on the asset. Building your business credit and paying down personal balances helps most.

Do I need a business plan to get startup funding?

For SBA loans and most microloans, yes. Lenders want to see how you will make money and repay. A simple plan with realistic numbers beats a long one with wishful ones.

Are there grants for startups?

Some, but they are competitive and often tied to research, location or specific owner groups. Federal research grants go through SBIR and STTR. Treat grants as a bonus, not your main plan.

What should I do first?

Separate your business finances with an EIN and business bank account, then build a simple plan and budget. Read my guide to startup funding with no revenue if you have not made a sale yet.

Bottom line

New businesses have real options, they just look different from what an established company can get. Start with funding tied to a specific asset or program, use personal credit carefully, treat grants as a bonus, and build your records from day one. When you are ready, Lending Gurus can show you which partners may be a fit, and they make the final call.

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