How To Raise Money For A Business Without A Loan

How To Raise Money For A Business Without A Loan

A lot of things go into starting a business and one of those things is money. One of the most common ways to raise money for a business is to take a loan. But some entrepreneurs are not comfortable with this option because of several reasons. But the good thing is there are several other ways to raise money for your business without necessarily taking a loan. This article will teach you everything you need to know on how to raise money for a business without a loan.

Let’s jump right into it…

1. Use Your Personal Funds

A lot of businesses started with personal funds.

Some business owners had money saved somewhere that they could just take and pour into their business.

While others may have been forced to scrap out their entire savings to raise money for their business.

Regardless, there is nothing wrong with using your personal funds to start up your business.

It is even the first idea that comes to people’s minds whenever they think of starting up a business without a loan.

But the big question then is, how do you raise personal funds?

Not everybody has a pile of money sitting around waiting to be used to start up a business.

So, what can you do to raise personal funds for your business?

Well, there are many ways to go about this, and below are some of the most common ones.


The first on the list is using your savings.

This would mean you have a pile of money waiting somewhere to be used for your business.

If you do not have savings, then you can start building one for the sole purpose of funding your business.

But if you choose to go through this route, a lot of things will have to change to make this happen.

For starters, you will need to reduce how much you spend.

And depending on how much you earn and your lifestyle, this might be a hard thing to do.

Also, while using your savings can be advantageous in a lot of ways, it comes with several other disadvantages.

For instance, if your business fails, you would lose your savings with no way of making it back.

Also, this source of funding is quite limited and is likely to dry up relatively quickly.

So, what happens when you no longer have any money in the bank and your business still needs funds?

Perhaps the second option below may come in handy at this point.

Sell Off Your Assets

You can raise money to start up your business by selling off some of your assets.

This can easily serve as a backup or alternative to option one above.

If your savings run dry while your business still needs funding, you can sell some assets to generate more funds.

Likewise, if you don’t savings nor a means to build one, you can easily sell off your assets to raise money.

The assets you choose to sell to raise money for your business can fall into any category.

So, if the amount needed to start your business is not so big, you can decide to sell off your car to raise the money.

Earn More Money – How to Raise Money for a Business Without a Loan

If you are currently not earning enough money to fund your business, then you should consider earning more money.

Can you take on another job?

Do you have any skills you could render as a side hustle?

Think of the things you can do to generate more income.

But whatever you do should still give you time to be able to set up or operate your business.

The extra cash you get from your side hustle should go directly into your business or the savings for it.

Do not be tempted to use the extra cash for yourself or to fund your lifestyle.

Remember you were doing okay before you started earning more and be committed to the reason why you had to start earning more.

Bootstrapping – How to Raise Money for a Business Without a Loan

Bootstrapping is the next best option if you don’t have enough money in your savings or you don’t want to sell your assets.

It simply involves using your savings, smart operations and sweat equity to build your business.

Once your business is operational, you can then reinvest money made from the business back into it.

Doing this will remove the need of getting a loan or getting funds from investors.

And just like with every other method of using your personal funds for your business discussed so far, bootstrapping also means you will have full control of your business.

Also, since your business’s growth is dependent on the money you get directly from your customers, your customer’s needs will be your priority.

This means that you will be dedicated to giving them premium customer care.

Your marketing strategies will also be a priority because you have to get people interested in your business.

Both of these will end up being to your advantage both now and in the long run.

Read this article to learn more about bootstrapping

Tips to Keep in Mind When Using Your Personal Money to Fund Your Business

If you decide to try any of the methods discussed so far, then you need to keep certain things in mind as you do this.

It’s very easy to get carried away and put yourself in an unwanted or unfavorable situation when using your personal funds for your business.

This is why you need to be careful as you go and also consider the following

Proper Accounting

You need to make a proper account of the money you spend on your business.

When putting your personal money into your business, think of that money as a loan.

Properly account for all the money you spend because you need to get that money back.

So, do not just keep pumping money into your business without knowing how much you are spending.

Be accountable for it all.

And once your business starts doing well, you can start getting back your money.

Have Separate Accounts

One way to ensure you do tip one is by having separate accounts for your business and personal funds.

Do not make the mistake of using your personal bank account as your business account as well.

Open a bank account for your business.

Not only will this help you keep proper account, but it will also prevent you from running into some legal liabilities further down the road.

Invoicing – How to Raise Money for a Business Without a Loan

Another thing you should also take seriously when using your personal money for your business is invoicing.

Once goods are delivered, ensure you send invoices.

Make sure payment terms are clear, including the payment period.

When you send invoices, ensure you follow up on them.

You could make this easier by using follow-up SMS or email templates.

Funding – How to Raise Money for a Business Without a Loan

Remember, you need to take a proper record of the amount you spend on your business.

You can make doing this easier with how you fund your business.

Before putting your personal money into your business, take your time to calculate the amount you need.

You may not get the exact amount, so it’s okay to make estimates.

Once you do this, transfer the estimated amount all at once to your business bank account.

Doing this will make it a whole lot easier to keep a record of the money spent.

Imagine making multiple transactions instead of a single bulk one.

You may have a hard time keeping records of all these transfers and may even lose records of some of them.

Pay Yourself– How to Raise Money for a Business Without a Loan

Getting your money back does not mean you will take out all the money you spent on your business all at once.

No, the money spent should gradually go back into your account.

Pulling out a huge sum of money from your business just because you have started making revenue may harm your business.

So, instead of doing this, put yourself on a payment plan.

Take a certain percentage of the profit made.

As the revenue gets higher, your pay can also grow simultaneously.

Advantages and Disadvantages of Using Your Personal Money to Fund Your Business

Before you finally decide on using your personal money for your business, you need to consider this option from all sides.

Just like with everything in life, using your personal money for your business comes with some benefits and some drawbacks.

Considering both of these things will help you decide whether or not it is something you should or can afford to do.

Therefore, some of the basic advantages and disadvantages of taking this path will be discussed below.


When you fund your business with your personal money, you get to avoid certain situations and challenges further down the road.

For starters, you do not need to battle with the fear of whether or not your loan request would be approved; you do not need to keep your fingers crossed as you wait for the funds.

Some loan agencies often take a while before disbursing approved funds and the wait can be frustrating and nerve-wracking for some people.

Additionally, loans sometimes come with an interest rate that some business owners have a hard time paying off later on.

When you use your personal funds, you save yourself the trouble of high-interest rates.

Finally, your business will be solely yours.

This is unlike the case where you get funding from an organization/individual that wants a share of your business as part of the deal for loaning you money for your business.


Perhaps the biggest disadvantage of using your personal funds for your business is that it may strain your finances.

And if things end up going south, you may lose valuable funds.

Secondly, when you raise your personal money for your business, you also have to build your mentor board and network all by yourself.

But when you work with angel investors or other organizations, you may have a ready-made network at your disposal.

This may not seem like a serious disadvantage until you start building your network and you get to see just how difficult it is.

Lastly, your business may grow at a relatively slower pace when you are using just your personal funds for it.

This is because your money may not be enough to give your business the boost and expansion needed to make it grow faster.

The good news is that there are other ways you can raise money for your business without a loan.

So, you do not have to go by this route if you think is not the best for you.

Or you can simply use more than one method to achieve the best results.

2. Friends and Family

Another way you can raise money for a business without a loan is by asking for financial assistance from your friends and family.

Some friends and family may not mind gifting you the money to invest in your business.

While others would rather lend you the money.

The good thing about borrowing money from this category of people is that they are close to you and they most likely won’t ask for interest.

And even if they do, it won’t be as high as what you’d be charged for a bank loan.

You also won’t have to go through too many procedures to get the money from them.

Unlike what would happen if you decide to take a bank loan.

This option seems quite convenient and favorable but it also has its drawbacks.

Perhaps the biggest is that it could damage your relationship with the person you borrowed from if things don’t work out the way they were meant to.

For instance, if your business fails and you are unable to pay back the money borrowed.

Mixing business with friends/family is a very tricky thing to do and this is why a lot of business owners tend to avoid it as much as they can.

3. Business Contests – How to Raise Money for a Business Without a Loan

You can get into a business competition to raise money for your business.

There are so many of these around these days, so it should not be hard to find and apply for one.

The main idea behind these contests is for entrepreneurs to pitch their business to a room of investors and judges.

If they can sell their business well, they would win and then receive business advice/guidance, awards, and most importantly funding.

But if you are to apply this method, you need creativity and effective planning.

Your business plan has to be top-notch and your project needs to stand out from that of others in the competition.

Some people may not win the competition, but they still end up getting an investor for their business.

This is because what might not appeal to one investor may appeal to the next.

Therefore, this option is worth trying out.

4. Crowdfunding – How to Raise Money for a Business Without a Loan

Crowdfunding is among the best and most common ways to raise money for a business without a loan.

It typically involves putting your business idea out there for people to contribute.

The process involved in crowdfunding is quite straightforward.

First, you sign up on a crowdfunding website.

Once that is done, you have to put your business out there by briefly describing your business and services and/or products.

You also need to talk about your business goals, how you intend to generate profit with the business idea, and finally how much money you need to raise.

When people read through your business idea, they can then decide to invest in it if it is something they like.

They can do this by either just making a donation or pre-ordering your product/service.

Aside from raising money for your business, crowdfunding also gives you a chance to market your business for free.

It’s a great way to raise brand awareness even before you launch your business.

Its major drawback, however, is that is very competitive because of how popular it has gotten.

So, if you want to attract attention, you need to have a great business idea.

5. Grants and Special Programs

There are a lot of grants and special programs out there that can help you raise money for your business without a loan.

Grants are great options because you won’t pay them back.

You also won’t have to give up part of your business to get them, as is the case with venture capitalists and angel investors.

Every year, organizations and the government organize hundreds of grants for both small and medium-sized businesses.

But most times, these grants may focus on certain areas such as women-owned businesses, research, minority entrepreneurs, and so on.

This, however, does not mean you can’t find one that would suit you and your business.

You simply need to do proper research and you most likely will find what you are looking for.

Conclusion on How to Raise Money for a Business Without a Loan

Taking a loan to fund a business is tricky business.

And a lot of business owners will avoid doing it if they could.

The good news is, they could.

There are so many ways to raise money for a business without a loan.

This article has looked at five of these methods.

But there are also others you could consider checking out like equity financing, venture capitalists, angel investors, private investors, hire purchase, and so on.

However, while you may not be directly taking a loan if you decide to do any of the following, their drawbacks are almost as bad as taking a loan.

And this is why they may not be the most favorable option for you.

But it’s always a great idea to consider other options before settling for one.

So, do well to make your research about all these options before deciding on which one to go for.