Funding a US startup without a bank loan: own capital, angels, crowdfunding, grants and the rules behind each

A European founder who walks into a Texas bank with a business plan and asks for a startup loan will usually leave with a friendly handshake and a brochure for a deposit account. American banks lend against cash flow, collateral and a credit history, and a new US company has none of the three. That does not make the US a hard place to raise money. It has the deepest pool of private risk capital in the world, and a set of securities rules that let a small company tap it legally.

Start with your own money, and the customer's

Most American small businesses are financed first by their founders: savings, the proceeds of a business sold at home, a loan from the European parent company. That is not a weakness. Investors and later lenders read the founder's own stake as a sign of commitment, and for a founder on an E-2 visa it is a legal requirement. The regulations define an E-2 investment as capital placed at risk, subject to partial or total loss, and it must be unsecured personal business capital or capital secured by personal assets, irrevocably committed to the enterprise. A loan secured by the company's own assets does not count toward your E-2 investment. Our guide to how much an E-2 investor needs to invest explains the amounts in practice.

The second-cheapest money comes from customers. Deposits on orders, annual subscriptions paid upfront, pre-sales of a product before it ships and milestone payments on service contracts all fund a business without giving away a share of it. American B2B buyers are used to paying deposits when the supplier is new. Ask.

Then manage the cash you have as carefully as the cash you hope to raise. A 13-week cash forecast, explained in our guide to running the finances of a US small business, tells you how long the runway really is and when to start talking to investors, which should be six months before you need the money, not six weeks.

Every share you sell is a security

The most important rule for founders raising money in the US: selling shares, units of an LLC, convertible notes or SAFEs to investors is an offer of securities. It must be registered with the Securities and Exchange Commission or fit an exemption. Almost every startup uses an exemption, and choosing the right one decides who you can ask and how.

An accredited investor, as an individual, has a net worth over $1 million excluding the primary residence, or income over $200,000 (or $300,000 together with a spouse or partner) in each of the past two years with the same expected this year. Holders of certain securities licenses and the company's own directors and executive officers also qualify.

For offerings under Rule 506, the company files a short notice on Form D through the SEC's EDGAR system within 15 days of the first sale. Founders forget this filing more often than any other, and it is easy to do properly.

Friends, family and angels

The first outside round of a typical American startup comes from people who know the founders, and from angel investors: wealthy individuals who invest their own money in early companies, often in groups. Austin has an active angel scene, and we describe the wider ecosystem in our piece on Texas as a base for startups and capital.

These rounds use a handful of standard instruments.

• Common or preferred stock in a corporation. A priced round sets a valuation and gives the investors shares, usually preferred stock with a liquidation preference.
• The SAFE, a simple agreement for future equity. The investor pays now and receives shares in the next priced round, typically at a discount or subject to a valuation cap. No interest, no maturity date.
• The convertible note. A loan that converts into shares at the next round, with interest and a maturity date. More common with investors who want the protection of debt.
• LLC membership units. Possible, but most professional investors avoid them because the LLC's profit and loss flow through to their personal tax returns.

Friends and family deserve the same paperwork as a professional angel: a signed subscription agreement, the instrument itself and a record in the cap table. A round under Rule 506(b) lets you include up to 35 non-accredited friends over any 90 days, and many founders still keep these rounds to accredited investors only, to keep the paperwork simple. In our experience, an uncle in Bologna with a handshake deal is the most common reason a later due diligence stalls.

Crowdfunding: the rules in numbers

Regulation Crowdfunding lets a company sell securities to the general public online. It is a real option for consumer brands, breweries, restaurants and products with a loyal community, where customers become investors. The framework is detailed.

For the company

• Up to $5 million in a 12-month period.
• All sales through one SEC-registered broker-dealer or funding portal, online.
• A disclosure document on Form C, filed on EDGAR and with the platform.
• Financial statements depending on the amount raised in the prior 12 months: certified by the principal executive officer up to $124,000; reviewed by an independent accountant above $124,000 up to $618,000; above $618,000, reviewed statements for a first-time issuer raising up to $1,235,000, otherwise audited statements.
• An annual report on Form C-AR within 120 days after the fiscal year ends, filed on EDGAR and posted on your website, for as long as the rules require.
• Investors generally cannot resell the securities for one year.

For the investor

• If annual income or net worth is below $124,000, the limit over 12 months is the greater of $2,500 or 5 percent of the greater of the two.
• If both are at least $124,000, the limit is 10 percent of the greater of the two.
• Non-accredited investors may buy no more than $124,000 in total across all crowdfunding offerings in 12 months.

One condition matters for our readers: non-US companies cannot use Regulation Crowdfunding. A French or Irish company cannot crowdfund American investors this way, but its US subsidiary or a new US company can. Budget for the platform's fees, the accountant's review and the marketing campaign before deciding; a crowdfunding round is a marketing project as much as a financing.

Grants: SBIR and STTR are back

The federal government's largest program for early-stage research funding is the Small Business Innovation Research program, together with its sister program for partnerships with research institutions, STTR. Federal agencies set aside part of their research budgets for small companies, awarding grants and contracts in phases from feasibility studies to prototypes.

The programs went through a difficult year. Their legal authority expired on September 30, 2025, which left agencies without authority for new awards until Congress acted. On April 13, 2026 the Small Business Innovation and Economic Security Act was signed into law, reauthorizing SBIR and STTR through September 30, 2031.

Eligibility is strict, and this is where European founders need to read carefully. An awardee, together with its affiliates, may have no more than 500 employees, and it must be more than 50 percent directly owned and controlled by individuals who are US citizens or permanent residents, or by other qualifying small businesses (for SBIR only, agencies may also allow majority ownership by several venture capital, hedge fund or private equity firms). A company owned by founders on E-2 or L-1 visas, or by a European parent, does not meet the ownership test. Once a founder has a green card, it may.

Other grants exist at state and local level, mostly tied to job creation in a specific place. They rarely pay for the start of a business, but they can matter for a factory or a regional office; our page on US location incentives compares the main states.

Credit without a classic bank loan

Between equity and a term loan from a bank sit several forms of financing that young companies use.

• Business credit cards and lines of credit, often available after some months of revenue and a few years of credit history. Our guide to a line of credit for your US company describes what banks look for.
• Revenue-based financing, repaid as a share of monthly revenue. Suited to subscription and e-commerce businesses with predictable sales, and expensive if growth is slower than planned.
• Equipment financing and leasing, secured by the equipment itself.
• Invoice financing, which advances money against receivables from creditworthy customers.
• A loan from the European parent or the founders, documented with a written agreement and an arm's-length interest rate.

Read the effective annual cost of each before signing. Merchant cash advances in particular are sold by daily or weekly payment and a factor rate, which can hide an annual cost far above what a bank would charge.

Investor-ready: structure, tax and paperwork

American investors fund American structures. For a company that plans to raise equity, that almost always means a C corporation, usually formed in Delaware, rather than an LLC. Our guide to forming a Delaware Inc covers shares, vesting and the 83(b) election founders need to file in time.

The C corporation also unlocks a strong tax incentive for US investors: the exclusion for qualified small business stock under Section 1202. For stock issued after July 4, 2025, the One Big Beautiful Bill Act changed the rules:

The gain eligible per issuer is capped at the greater of $15 million (adjusted for inflation from 2027) or ten times the shareholder's basis, and the corporation's aggregate gross assets may not exceed $75 million when the stock is issued. The stock must be acquired at original issue, and at least 80 percent of the company's assets must be used in a qualifying business; fields such as consulting, law, accounting, financial services, health and hospitality are excluded. The exclusion is for non-corporate shareholders who are subject to US tax, which makes it a selling point to American angels and a planning point for founders who will move to the US.

Money from Europe

Foreign investment brings its own filings. A US company that receives a foreign investment may have to report to the Bureau of Economic Analysis, as described in our page on the BE-13 report. A company with a 25 percent foreign shareholder files Form 5472 with its tax return. And investments in companies working with critical technologies, critical infrastructure or sensitive personal data can fall under CFIUS review. None of this is a reason to avoid European money; it is a reason to plan the round with the filings in mind.

Finally, the basics that every investor checks: a clean cap table, signed founder agreements with vesting, IP assigned to the company, books closed monthly and tax returns filed. A company that has these in order raises faster and on better terms, whatever the source of the money.