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How much does it cost to start a business?

Startup costs can be steep, but there are various funding options to help.

How much you need to start a business depends on your business type and how you’ll operate. Costs such as equipment, employees, insurance, office space and marketing should all be factored in.

How much money do I need to start a business?

It can cost anywhere from $10,000 to $20,000 to start a business from the ground up. “Starting a small business demands financial foresight,” says Spokeo’s CEO, Harrison Tang. “For those starting from scratch, a ballpark figure can vary, but allocating around $10,000 to $20,000 for essentials is prudent.”

To get a fuller picture of what your business’s budget should look like, add your estimated expenses together. These expenses will depend on what type of business you have. Are you going to open a restaurant, clothing store, graphic design company or develop websites? Depending on the business you want to start, you’ll need to factor in employee costs, equipment, insurance, building space and more.

9 common startup costs

Not all of these startup costs will apply to every business, but there’s a good chance many will need to be factored into your business plan.

  1. Licenses and permits. In most states, registering your business as an LLC, C corporation or S corporation costs under $300. You may also need permits, such as a liquor license if you’re opening a restaurant or bar that sells alcohol. Licensing and permit costs can vary, so it’s best to meet with an accountant and attorney to guide you through the process.
  2. Building. If you need to rent or lease a space for your business, plan on a security deposit and first month’s rent and utilities. If you want to renovate or decorate, that’s another cost to consider.
  3. Equipment. Gyms, restaurants, agriculture and other businesses that require equipment to function have a lot of upfront costs. There are equipment loans for this exact purpose, or you may have the option to finance or lease equipment from the supplier itself.
  4. Inventory. Restaurants, clothing stores and more will have to worry about inventory costs. There are inventory financing options, but they typically aren’t available to perishable inventory, such as food.
  5. Employees. Payroll should cover more than just an hourly salary. Consider benefits, employment taxes, commissions, overtime pay and bonuses when calculating your startup budget. Remember that you also need to be paid, so be sure to account for your own wages.
  6. Insurance. You may need to factor in equipment insurance, liability insurance, employee health insurance, and a building’s insurance if you’re renting, buying or leasing a space.
  7. Loan payments. If you’re borrowing to get started, you’ll have to consider the cost of repaying those loans in your startup costs.
  8. Software. Accounting, point-of-sale systems, employee communications, payroll, bookkeeping software and much more may be required to keep your business running. Software isn’t always cheap and should definitely be considered in your startup costs.
  9. Professional help. There’s a good chance you’re not an expert in everything. If you’re enlisting the help of a lawyer, tax professionals or consultants, be sure to factor in those costs.

There are many worksheets you can use to start estimating costs, such as the free Small Business Association (SBA) worksheet. But calculating up how much you need to fund a business is just the beginning — you’ll also need to explore options to get those funds if you don’t have at least $20,000 stashed away.

Should I borrow money to help with startup costs?

Borrowing money to start a business is often necessary. Getting a loan can help you get inventory or equipment or secure a place to do business. There are fixed installment loans and lines of credit to consider, depending on whether you need a lot of cash upfront or a revolving line of credit.

  • Installment loans. If you want a fixed loan, business loans can offer loan amounts as low as $1,000 to the millions.
  • Line of credit. A great option for flexible funding, a revolving line of credit can really help with startup costs.
  • Business credit cards. If you want some flexible cash flow, there are plenty of business credit cards to choose from, with top cards offering cashback rewards, travel perks and low APR.
  • Equipment financing. If you need to purchase equipment to get your business running, equipment financing is a very viable option. These loans are secured by the equipment you’re financing, and work very similarly to auto loans.

Where to get funding as a startup

If you’re a brand new business, it can be difficult to land funding. The tough part of starting a new business is that you’re unlikely to qualify for traditional business loans. A typical business lender is likely to require at least two years in business and at least $100,000 in monthly revenue.

“Acquiring a business loan as a startup can be challenging due to revenue and time in business requirements,” says Tang. “Exploring alternative financing avenues, such as community grants, crowdfunding, or angel investors, can offer promising prospects for startups seeking capital infusion.”

Startup grants are time-sensitive and limited but a great option to get funding without having to worry about paying it back. And if all else fails, consider SBA loans. These business loans are backed by the government, which you can qualify for if your business is for profit, located in the US, meets size standards and you’ve tried and failed to get funding elsewhere.

Bottom line

It can cost a lot to start a new business, and it greatly varies depending on what type of business you want to open. On the whole, expect to need anywhere from $10,000 to $50,000 to get started.

For more help, see our comprehensive small business resource guide.

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