Raising money to run a small business is hard. Just ask the owners: bootstrapping wasn’t enough for the four out of five who, after starting a business in 2024, needed financing beyond what their own revenue could cover.
While a lucky few can turn to equity financing or friends and family for a cash infusion, these aren’t realistic scenarios for everyone. Plus, even these options come with their downsides.
If you’re lucky enough to get the attention of angel investors or venture capitalists and raise a round of venture capital, for example, you risk equity dilution, which can hurt you in the long run. Similarly, relying on borrowing from loved ones can be a fraught process. Unclear or nonexistent legal terms can lead to disputes over equity or repayment, investors who feel entitled to a say in business decisions, pressure on the founder to deliver returns fast, and relationship damage if the business fails.
Thankfully, there are other ways to fund your business without selling your equity. In this post, we highlight seven non-dilutive funding options (also known as non-equity or non-dilutive financing) for your business.
1. Small business grants and benefits
Government grants, along with foundation and local funding, can be lifesavers for small businesses—but they're scattered across sources, which makes it easy to miss funding you actually qualify for.
The U.S. Small Business Administration’s (SBA) Local Assistance finder connects you with your nearest Small Business Development Center, where an advisor can point you to grants specific to your state, industry, or business type, often for free. If you're looking at federal grants specifically, Grants.gov is the official searchable database. Just remember, grants take patience. Most require an application and review cycle, but since you don't repay them, they're often worth the extra effort.
2. SBA loans
SBA loans are one of the most accessible forms of debt financing for small businesses. While the SBA doesn't lend directly, it guarantees a portion of the bank loan, which makes banks more willing to lend at better rates and longer terms than they'd get otherwise.
The 7(a) loan program is the SBA's most popular, and it's especially helpful for profitable businesses that need working capital, equipment, or real estate. If a 7(a) doesn't fit, the SBA also backs microloans up to $50,000, 504 loans for real estate and major equipment, and disaster relief loans. Approval can take a few weeks, but the rates and terms are hard to beat elsewhere.
3. Business line of credit
Not every expense shows up on a schedule you can plan for. Payroll gaps, a slow month, or a surprise repair can throw even the most realistic forecasts off-kilter. In fact, more than a third of small businesses sought funding in 2024 just to cover regular cash flow, not to grow.
A business line of credit gives you funds you can draw from whenever you need them, up to a set limit, and you only pay interest on what you actually use—unlike a term loan, where interest starts accruing on the full amount immediately.
Lines of credit come in two flavors: secured, which require collateral and typically offer higher limits and lower rates, and unsecured, which skip the collateral but come with stricter approval criteria. Most lenders look for a credit score of 650+, at least a year in business, and steady monthly revenue. If your cash flow runs in predictable ebbs and flows, a business line of credit can be the flexible cushion you need that doesn't require tapping your own savings or credit cards.
4. Equipment financing
Need a new delivery van, an oven, or manufacturing equipment but don't want to drain your cash reserves? Equipment financing lets a lender cover the upfront cost, which you pay back (plus interest) in fixed monthly installments, typically over one to five years.
Because the equipment itself acts as collateral, it's often easier to qualify for than an unsecured loan, even if your credit isn't perfect. Most lenders will finance 80–100% of the purchase price, so you can get what you need without a big cash outlay. Rates vary based on your credit, time in business, and the type of equipment, but expect anywhere from about 7% to 30% APR.
5. Revenue-based financing
If your revenue swings with the seasons, a fixed monthly loan payment can feel like a bad fit. Revenue-based financing (RBF) solves that by tying your repayment to your sales: you get an upfront cash infusion, then pay back a set percentage of your monthly revenue until you hit an agreed-upon cap, usually 1.3 to 3 times what you borrowed.
With this option, lenders typically care more about your revenue history than your credit score, reviewing three to six months of bank statements to make an offer (often within a day or two). It's also collateral-free, which makes it accessible without significant assets to pledge.
6. Invoice financing
If your business bills clients on 30- or 60-day terms, you already know the frustration of having revenue on paper that you can't actually spend yet.
Invoice financing lets you borrow against those unpaid invoices—typically 80–90% of their value upfront—so you're not stuck waiting on customers to pay before you can cover payroll or restock inventory. The lender collects a fee, often 1–5% per month the invoice is outstanding, and you repay once your customer pays you. It's a good fit if your revenue is steady but your cash flow lags behind it.
7. Crowdfunding
Reward-based crowdfunding platforms like Kickstarter and Indiegogo are different from equity crowdfunding platforms like Wefunder, where backers get an actual stake in your company. Reward-based crowdfunding lets you raise money directly from future customers, in exchange for early access, discounts, or the product itself. It works best for physical products with a clear story and a built-in audience, and a successful campaign doubles as market validation and pre-orders in one move.
The catch: most campaigns don't hit their funding goal, and running one well takes real marketing effort. If you go this route, treat your campaign page and outreach plan with the same rigor you'd bring to any product launch.
FAQs
How long does it take to get approved for an SBA loan?
SBA loan approval typically takes a few weeks. The SBA doesn't lend directly — it guarantees a portion of a bank loan, and the bank still underwrites the application — but in exchange for the wait, SBA-backed loans usually come with better rates and longer repayment terms than you'd get on your own.
Is revenue-based financing the same as a merchant cash advance?
No. Both repay as a percentage of sales, but merchant cash advances pull from daily or weekly card sales using a factor rate that's hard to compare across offers, while revenue-based financing draws a percentage of your total monthly revenue toward a clear, upfront repayment cap (usually 1.3–3x the amount borrowed) — making it more transparent and predictable.
Do I have to pay back a small business grant?
No. Unlike a loan, a grant doesn't need to be repaid. You keep the full amount as long as you meet the grant's terms, such as using the funds for their stated purpose. The tradeoff is competition and time: grant applications typically go through a formal review cycle, so approval can take longer than a loan or line of credit.
What credit score do I need for a business line of credit?
Most lenders look for a personal credit score of 650 or higher, at least one year in business, and steady monthly revenue. Secured lines of credit, which require collateral, tend to offer more flexible approval and lower rates than unsecured lines, which skip collateral but carry stricter requirements.
What's the difference between non-dilutive funding and equity financing?
Non-dilutive funding—grants, loans, lines of credit, and similar tools—lets you raise money without giving up ownership in your business. Equity financing, like raising a round from angel investors or venture capitalists, provides capital in exchange for a stake in your company, meaning you give up some control and future profits as it grows.
