How to Fund Your LLC? (10 Best Funding Approaches)
Thinking of starting a business but unsure how to fund your LLC? You're not alone—many entrepreneurs face this challenge.
As a mergers and acquisitions specialist, I’ve helped numerous clients finance their limited liability companies. In this guide, I’ll share proven funding strategies—ranging from self-funding to external financing options.
We'll explore the pros and cons of each method to help you choose the best path for your business goals.
Quick Summary:
- You can fund your LLC through personal funding, applying for business loans, acquiring a credit card, and pitching your business plan to investors.
- It is possible to fund your LLC through several capitalization sources based on the funding requirements.
- APR for a small business loan from traditional banks is between 5.89% and 12.23%, while an SBA loan is between 11.5% and 15%.
- I advise my clients to determine the nature of the business in terms of the service or product to ascertain the necessary capital required.
10 Best Ways to Fund Your LLC
When thinking about starting an LLC, most business owners begin their journey by thinking about how much money will be needed and where they can find it.
The amount depends on your financial situation and the main idea of your business.
1. Self-Funding
Self-funding is a common way to start a business, using your own savings or income from other jobs.
A SCORE survey found that 78% of entrepreneurs used personal funds to launch their businesses [1].
While risky—since you could lose personal assets—it gives you full control with no outside investors.
I advise clients to repay themselves from business profits over time to reduce risk.
2. Rollovers as Business Startups (ROBS)
ROBS lets you use retirement funds to start, buy, or grow a business without taking a loan or early withdrawal. Instead of incurring debt, you invest directly in your company.
However, if the business fails, you risk losing your retirement savings.
3. Crowdfunding
Crowdfunding lets you raise funds online through platforms like Kickstarter or Indiegogo.
Key points:
- You need a strong marketing strategy to attract donors.
- Funds raised may fall short of your goals.
- Payouts can take weeks or months after the campaign ends.
In my experience, it’s a good option when other funding methods aren’t accessible.
4. Informal Loans From Personal Network
Informal loans from friends or family can help you start your business without red tape, often with flexible terms.
Keep in mind:
- Put the agreement in writing to avoid misunderstandings.
- You may still owe interest, depending on the arrangement.
5. Grants and Local Government Programs
Government grants and local programs can provide free startup funds that don’t need to be repaid.
These are often available for specific groups like women, minorities, immigrants, veterans, or felons, but come with eligibility requirements.
The main drawback is high competition—success usually requires a strong business plan and presentation.
"Treat your business plan as a living document rather than just a paper that sits on a shelf. It should contain your vision, goals, strategies you’ll use, and some of the challenges you’ll have to overcome."
- Jon Morgan, CEO, Co-Founder & Editor-in-Chief of Venture Smarter
6. Venture Capital
Venture capital involves investors funding your business in exchange for equity or profits [2].
It’s a strong option if you have a solid plan—they offer funding, advice, and mentorship.
However, they may also seek control or decision-making power in your company.
7. Traditional Loan Institutions
Traditional lenders like banks and credit unions offer business loans to LLCs—but they require a strong business plan and collateral.
The average small business loan is \$633,000, yet only 26.9% get approved, and 29% of businesses fail due to cash flow issues [3].
Home equity loans are another option if you own property. Approvals can take time depending on credit and loan amount.
We've had a great experience with Novo and recommend it for small business banking.
8. Credit Card Loans
Credit card loans offer quick access to capital without loan applications or paperwork.
Many business credit cards come with low fees, cashback perks, or 0% intro APR. But interest rates can be high, so I advise clients to treat them as short-term solutions and repay balances quickly [4].
9. Adding Members to the LLC
Adding members to your LLC can provide you with additional capital and widen your network. New partners can provide contact with potential investors and clients.
10. Peer-to-Peer Lending Sites
Eligible businesses can use these peer-to-peer portals to get financing by applying for an online loan. Business owners with site accounts have the option of funding their company with interest-based loans.
These P2P lending sites offer lower interest rates and are online alternatives to traditional banks.
FAQs
What Are Capital Contributions to an LLC?
Capital contributions are the initial investments made by LLC members, with no minimum required.
How to Apply for an LLC Loan?
Check your credit score, choose a loan type, consult a lender, assess debt capacity, and prepare documents.
References:
- https://www.score.org/resource/blog-post/how-do-entrepreneurs-finance-their-startups
- https://www.investopedia.com/terms/v/venturecapital.asp
- https://www.fundera.com/business-loans/guides/average-small-business-loan-amount
- https://www.mycompanyworks.com/funding-your-company-top-ways-to-finance-your-llc-or-corporation/
