In this issue
Try this: Make a realistic startup financing strategy.
In the news: The Fed finally cut rates. What does that mean?
Tip of the month: One quick cybersecurity step.
Try this: Plan for the realities of startup funding
New business owners have lots of bills, but limited options for paying them. The vast majority of small-business owners turn to family, friends and their own savings for startup funding.
It won’t take long for you to have more financing options — after six months in operation, some online and community lenders may consider your business loan application. Here’s a list of those lenders.
But how do entrepreneurs manage in the meantime? According to a 2024 University of Chicago survey:
83% of business owners used their personal assets to fund startup costs.
25% used personal credit cards.
16% used business credit cards.
Loans and investors are rare, but not unheard of:
Around 9% of first-time entrepreneurs received any amount of government-backed business loans, and around 12% got bank loans. In both cases, about 2.5 times as many people applied for those loans.
More than 20% of business owners said they applied for venture capital, grants or crowdfunding. Fewer than 5% received that funding.
Here are your most realistic options for covering costs during your first few months.
Don’t quit your day job. Before you launch, start a savings account for your business and deposit extra cash whenever you can. (Here are some high-yield options.) That money will be some of the personal assets you can later use to fund startup costs. Then, work as long as you can. Having a steady paycheck (and health insurance, if your job provides it) will help you keep up with your personal bills while you get your business set up.
Consider buying instead of starting. Lenders are generally more willing to finance a business purchase than a startup. Those businesses already have financial histories, customers and suppliers, so it’s way less risky for lenders than an untested idea. The seller might be willing to finance the deal, too. Here’s more about getting funding to buy a business.
Capitalize on interest-free financing. When it’s time to start building out your space or developing inventory, you’ll need capital. A 0% APR business credit card gives you a little bit of runway to pay down your debt before you start owing interest.
Utilize your personal assets. This can put assets like your savings, car or house at risk. But if your personal credit is strong, you may be able to take out a personal loan (our top picks). And if you have equity in your home, a HELOC might be an option (our take on the pros and cons).
In the news: The Fed finally cut rates. So what?
In mid-September, the Federal Reserve cut the federal funds rate by a quarter of a percentage point. It was the first rate cut since December 2024.
When the Fed adjusts the federal funds rate, other interest rates tend to follow. That means borrowing becomes a little cheaper. But it doesn’t necessarily make getting those loans any easier.
Economic uncertainty generally makes banks more conservative with their lending decisions. Businesses perceived as a little risky — like those with less time in business or owners with lower credit scores — may have trouble getting approved regardless of interest rates. Here’s what you generally need to qualify for a business loan.
Also, the cost of borrowing depends on lots of factors, including your loan type, your lender and your qualifications. But falling rates might mean your next loan will have a slightly lower APR than it would have a few months ago.
If you’ll need financing in the next few years, consider starting a relationship with a local bank or community lender now. They may be more flexible than a national bank, while still offering reasonably competitive rates and terms.
Today’s tip: Make sure you have two-factor authentication on
According to a 2023 report from insurance company Hiscox, 41% of small businesses experienced a cyberattack during the previous year. Since small businesses don’t have as much time and money to spend on cybersecurity as large ones do, they’re often more vulnerable.
One easy step to make your business more secure: Make sure every platform that you and your employees log into requires two-factor authentication. That’s where you enter your username and password, then the platform sends you a text or email with a temporary passcode. You have to provide that passcode to confirm it’s really you, not a hacker using stolen login information.
Many software tools and financial institutions now support two-factor authentication. (If you use one that doesn’t, consider shopping around for a replacement sometime soon.) It might make logging in a little more annoying — but if it protects company and customer data, it’s worth it.
