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Fund Your Home-based Business the Right Way from the Start

Published By Janet Gershen-Siegel at September 6th, 2017

A home-based business can get expensive in a hurry. Between supplies and the phone system, to the printer ink and postage, and don’t forget your computer, you might be experiencing negative cash flow before your business really starts to take off. So here are some ideas for getting funding which don’t involve getting a loan from someone in your family.

The Small Business Administration

The SBA says that over half of American businesses are based out of a home. And they have a number of loan programs you can take advantage of. Note: the SBA doesn’t provide the loan; they work with the lender and they make these programs available to you, the small business owner.


These are not for a lot of money. The SBA facilitates microloans of up to $50,000, but the average amount is around $13,000. You can use an SBA microloan for:

  • Working capital
  • Furniture or fixtures
  • Inventory or supplies
  • Machinery or equipment

However, they won’t let you use it for buying real estate or to pay off business debts.

Real Estate and Equipment Loans

So you say you need to buy land or a building? Then this is the loan you’re looking for. It’s called a CDC/504 Loan. There are a few restrictions, such as that your business has to have less than $15 million in net worth. It also can’t be a business where profits depend upon sales made by an ever-increasing pool of participants. This can be the idea behind some work at home franchises, so be sure to read the fine print. You can use a CDC/504 loan for:

  • Buying land, including existing buildings.
  • Buying improvements, such as utilities, grading, street improvements, parking lots, and landscaping.
  • Building new facilities or modernizing, renovating, or converting existing ones.
  • Buying long-term machinery and equipment.

But you can’t use a 504 loan for:

  • Your company’s working capital or inventory.
  • Repaying, consolidating, or refinancing debt.
  • Speculating or investing in rental real estate.

General Small Business Loans

Ah, the 7(A). It’s available for most forms of small business although, like the CDC/504 loan, you can’t get one if your business’s profits depend on sales made by an ever-increasing number of participants. You also can’t get one if your business derives (either directly or indirectly) more than 2.5% of its gross revenue through the sale of products or services, or the presentation of any depictions or displays, of an indecent sexual nature. Since this is not too terribly well-defined, it’s hard to say whether it would include lingerie (although it most likely includes marital aids). You might need to check with your lender.

There are also some restrictions on franchises. Again, it’s always best to check the fine print and, if you have questions, talk to your lender.

Microloans (but not from the SBA)

There are other microloan providers. You can try the Association for Enterprise Opportunity to find a local microlender.

Bank Loans

What if you need more than a microloan, or your business falls into too many SBA exceptions? Then apply for a bank loan for your home-based business. Be prepared to put up collateral, which could be equipment or inventory or the like. Pay back your loan on time or else your business’s credit score will suffer.

Business Credit Cards

Another option is business credit cards. However, be aware that you must pay off business credit cards just like personal credit cards. A high credit utilization rate (the amount of credit you use, divided by the total amount of credit available to your company) of greater than 30% can bring down your business credit score. This can make it harder to borrow money or get another business credit card. Therefore, be vigilant with these and pay them off as soon as is practical.


You might want to try with a service such as Kickstarter or GoFundMe. Always make sure you read the fine print, because many crowdfunding platforms require that you give all of the funding back if you do not make your goal by the end of the crowdfunding campaign (IndieGoGo has a flexible funding option). Also, crowdfunding platforms take a percentage of the donations, and they generally will push to have you deliver on your promises, so you’ll have to actually do what your business is supposed to be doing – or face a potential lawsuit.

Crowdfunding works well when the donors can personally connect with the campaign creator, so you might do well if you can provide a personal touch. A crowdfunding campaign could take up a lot of time in promotions and, later, fulfillment, and that’s time you could be spending running your business.

Stop asking your family for handouts! There are lots of ways to fund your home-based business.

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