I have no sales yet. Where can the money come from?
Routes open to a business before its first sale, from pre-orders and research awards to friends and family and angel investors, cheapest first.
Most lenders want to see sales before they lend, so a business with none yet usually starts elsewhere. The cheapest money comes from customers who pay before you deliver, and from research awards and tax credits that are not repaid: SBIR and STTR awards from federal agencies take no ownership, and a young company with little or no income tax to pay can use up to $500,000 a year of the research credit against its payroll taxes.
After that, most early money is investment. Whatever the round is called, selling shares, convertible notes or SAFEs, even to friends and family, is a securities offering: it must be registered with the SEC or fit an exemption, most often under Regulation D.
20 routes to look at, cheapest first
Compare the first 4 side by side- L0
Free or nearly free
Little or no cash cost, though most take time and admin. Some bring money in, and a few have small fees.- Own cash and no-cost
Customer prepayments, deposits and pre-orders
Ask customers to pay some or all of the price before you deliver. The cash comes in before your costs go out, so you need to borrow less, but until you deliver you owe customers the goods or their money back.
Days - Own cash and no-cost
Supplier trade credit
Your suppliers let you pay for goods or services some time after you receive them, often 30 or 60 days later. Usually free if you pay on time, but giving up an early-payment discount can make it expensive.
Weeks - Grants, tax credits and prizes
Prize competitions and accelerators
Cash prizes from federal agencies and others for solving a set problem, and accelerator or incubator programs that give coaching, contacts and sometimes money. Prizes take no ownership; many accelerators do, so read the terms.
6 months or more - Grants, tax credits and prizes
Research and development tax credit
A federal tax credit for qualifying research spending. Young companies with little or no income tax to pay can use up to $500,000 a year of it against their payroll taxes instead.
Months - Grants, tax credits and prizes
SBIR and STTR research awards
Federal research and development funding for small US businesses, won in competitions run by 11 federal agencies. Nothing to repay and no ownership given up, but your project must match an agency's published topic.
MonthsUp to $2.2m - Grants, tax credits and prizes
State and local grants
Money from a state, county or city that you do not repay, usually tied to creating jobs, investing in a place or a set purpose. Rare, competitive and slow, and the field is full of "free government grant" scams.
6 months or more - Supplier and buyer-led finance
Federal contract financing
Payments a federal agency makes to its contractor before delivery, as costs are incurred or milestones are met, plus the right to assign contract payments to a bank as security. No separate charge, but it has to be in the contract, and it is meant to show up in a lower price.
Weeks - Crowdfunding and community finance
Rewards crowdfunding
Raise money online from many backers who get a reward, often the product itself, instead of a share of the business. No repayment or dilution, but you must deliver what you promised, and the money is usually taxable income.
Months
- Own cash and no-cost
- L1
Very cheap or subsidised
Borrowing on better terms than the market, usually because a public body, community lender or large buyer is involved.- Government-backed and community lending
Community development lenders (CDFIs)
Loans from community development financial institutions: mission-driven lenders certified by the US Treasury that serve low-income communities and people who find it hard to get finance elsewhere, often with advice alongside.
WeeksPersonal guarantee likely - Government-backed and community lending
SBA Microloans
A small business loan of up to $50,000 from a nonprofit community lender that the SBA funds, for working capital, supplies and equipment. The average is about $13,000.
WeeksUp to $50kPersonal guarantee likely
- Government-backed and community lending
- L2
Mainstream secured debt
Standard borrowing from banks, credit unions and mainstream lenders, often secured on assets or backed by a personal guarantee.- Own cash and no-cost
Retirement savings in your business (ROBS)
Moving retirement savings, without tax, into a new retirement plan that buys shares in your own new C corporation. It is your own money, but the IRS found most such businesses failed or were failing, and many owners lost their savings as well as the business.
Weeks - Bank and mainstream debt
Personal borrowing for the business
Borrowing in your own name to fund the business: a home equity loan or line, a 401(k) loan, or a personal loan or card. Often easier to get than business credit, but you, your home or your retirement savings carry the risk if the business fails.
Weeks
- Own cash and no-cost
- L3
Specialist secured debt
Borrowing secured on specific assets such as invoices or inventory, with more fees and conditions than mainstream debt. - Equity rungs. These routes cost no interest, but you give up part of the ownership and control of your business. They are ranked by how much you give up, not by a made-up interest rate. Over time, equity can be the most expensive money of all.E1
Light dilution
You sell a small share of the company, usually to many small investors or people you know, and keep control of how it is run.- Crowdfunding and community finance
Regulation Crowdfunding
Raise up to $5 million in 12 months from the public, including people who are not wealthy investors, by selling shares, debt or other securities through one SEC-registered online platform.
MonthsUp to $5mLoans, or shares if you choose - Private equity investment
Friends and family
Money from people you know, as a loan, convertible debt or shares, usually at the very start. Quick and flexible, but even a small round is usually a securities offering, and a failure can strain relationships.
WeeksLoans, or shares if you choose - Hybrid instruments
Convertible notes
A loan from investors that usually turns into shares at your next funding round. It puts off agreeing a valuation, but until it converts it is real debt, with interest and a repayment date.
WeeksMay give up shares - Hybrid instruments
SAFEs (simple agreements for future equity)
An investor pays now for the right to shares later, usually when the company raises a priced round. Quick and cheap to agree, with no interest or repayment date, but it is a promise of future ownership, and its terms decide how much of the company you give up.
WeeksGives up shares
- Crowdfunding and community finance
- E2
Significant dilution and investor rights
Investors take a meaningful stake and usually get rights such as a board seat, a veto over big decisions, or a preferred return.- Private equity investment
Angel investors
Wealthy individuals, alone or in groups, buy a stake in an early-stage company and often bring advice and contacts. It is a securities offering, usually made under the SEC's Regulation D, mostly to accredited investors.
MonthsGives up shares - Private equity investment
Corporate venture capital
A large company invests its own money in a smaller one whose product or technology matters to its business, in return for shares. You can gain a customer, a partner and a route to market, but you share plans with a company that may compete with you or want to buy you.
6 months or moreGives up shares - Private equity investment
Venture capital
Investment from venture capital funds in fast-growing companies, in return for shares (usually preferred stock) and a say in how the company is run. Large sums for growth, but only for a few businesses, and at the cost of ownership and control.
6 months or moreGives up shares
- Private equity investment
Worth knowing
- Write down the terms of any money from friends and family, whether it is a loan or shares, and explain the risks before they put money in.
- If you plan to raise from angels or venture capital, check whether your business should be a C corporation. Only C corporations can issue stock that qualifies for the QSBS tax break.
Sources
- SBIR.gov: About SBIR and STTR · checked October 18, 2026
- IRS: Research credit against payroll tax for small businesses · checked October 17, 2026
- SEC: Early-stage investors (friends and family, angels, venture capital) · checked October 17, 2026
- 26 U.S.C. 1202: partial exclusion for gain from certain small business stock (2023 edition) · checked October 17, 2026
Facts about each route are sourced on its own page.