It was 2007. I was a part owner in a private capital raising company. My three business partners and I were sitting around a table at a local restaurant over breakfast, talking through our goals. One of the big items on the agenda: how to raise $457,000 for a client we were working with.

There were several approaches we could have taken, but we chose to use a PPM (private placement memorandum). We went through the arduous task of filing all the necessary government and legal documentation, and about two months later we were ready to move forward, contacting people on a private, individual basis to raise the funds.

There’s a lot more to that process, but that’s the nutshell version. Below is an overview of the main capital-raising methods you can consider. I’ve personally used many of them. If you have questions, leave a comment and I’ll get back to you.

1. SBA Microloans

The SBA Microloan program provides loans up to $50,000 to help small businesses and certain not-for-profit childcare centers start up and expand. The average microloan is about $13,000.

The U.S. Small Business Administration provides funds to specially designated intermediary lenders — nonprofit, community-based organizations with experience in lending plus management and technical assistance. These intermediaries administer the microloan program for eligible borrowers.

2. SBA Loans

A loan officer at your local bank or credit union can walk you through the steps and paperwork involved in determining whether a Small Business Administration (SBA) loan is right for you. Start with:

• Banks
• Credit unions

3. Angel Investors

Angel investors are typically seasoned entrepreneurs or well-funded professionals — doctors, attorneys, business owners, and the like. The SEC usually requires these investors to be accredited. You can read the SEC’s definition of an accredited investor here. And if you’re looking for a place to start finding angel groups, the Angel Capital Association — the largest professional association of accredited angel investors — is a great resource.

4. Asset-Based Loans

If you have something tangible you’re willing to use as collateral, an asset-based loan is worth considering. You might put up a vehicle, equipment, tools, or other valuable assets in exchange for the loan. Just be clear-eyed about the risk: if the business can’t repay, you can lose the asset.

5. Peer-to-Peer Lending

Peer-to-peer (P2P) lending connects borrowers directly with individual investors instead of a traditional bank. The landscape has changed a lot in recent years, so here’s the current picture:

• Prosper — America’s first P2P lending marketplace, and still operating the model in 2026. It remains one of the main options for this type of borrowing.
• LendingClub — worth knowing: LendingClub exited retail peer-to-peer lending at the end of 2020 and has since become a bank (rebranded as Happen Bank). It’s no longer a true P2P option, though it still offers personal loans through its banking arm.

6. 401(k) Financing

If you have a 401(k), you can consider using it as a funding source for your business. There are specific rules to follow to avoid taxes and penalties, so speak with your financial advisor before doing this.

This is exactly how I funded my first startup in 2006 — I pulled the funds from my 401(k) and took the leap. But I had a real plan going in; it wasn’t a willy-nilly approach. I strongly suggest doing the same.

7. Raising Capital Using an LLC

This approach involves having partners put up the funding to grow the business. For example, if you wanted to raise $100,000 and bring on partners, four of them could contribute $20,000 each (with your own stake making up the rest). Each partner can have a specialized role and a share in the net profits.

Your LLC’s operating agreement explains the ins and outs of all the “what ifs” — how you and the partners get paid, what happens in various scenarios, and more. I recommend speaking with a licensed professional if you need help setting this up. Common structures include:

• Selling company equity
• Bringing on capital partners

8. Raising Money Privately

Raising money privately from individual investors is a well-established route, but it’s heavily regulated by securities law. Two key concepts:

• PPM (Private Placement Memorandum): the legal document that discloses the details and risks of your offering to prospective private investors.
• Blue Sky Laws: state-level securities regulations you must comply with, in addition to federal rules, when offering investments.

This is the route my partners and I used with the PPM I mentioned at the start. It’s powerful but paperwork-heavy and legally serious — work with a securities attorney.

9. Crowdfunding

Crowdfunding lets you raise smaller amounts from many people, often in exchange for early product access, rewards, or equity. It doubles as market validation — if strangers will back your idea, that’s a strong demand signal. See my full guide to the top crowdfunding platforms to find the right fit for your project.

10. Credit Cards

There are strong business credit cards worth considering for funding — from issuers like Capital One, American Express, and MBNA. Be very aware of the interest rates and all the terms and conditions. Look for 0% introductory-APR cards; they still exist. Just have a clear plan to pay the balance before the promotional period ends, because standard credit-card rates are among the most expensive ways to fund a business.

Every one of these methods has pros and cons. What have you personally experienced? Leave a comment below.