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If you’re looking for a small business loan with bad credit or no credit, you could face some extra hurdles. Banks tend to prefer borrowers with a good credit score — typically a personal credit score of 670 or higher — leaving business owners wondering how to apply for a business loan if they have bad credit or if their business has no credit history.

Fortunately, there are options for business loans for bad credit. Even if you have a personal credit score below the mid-600s, you may find lenders who offer options to help you start, grow, or expand your small business.

Below, you’ll find a guide to resources that might help you with the process of applying for a small business loan when you have bad credit, as well as different loan options.

What Is a Bad Credit Business Loan?

A bad credit small business loan is a financing option designed for businesses with low credit scores or limited credit history. These term loans often come from alternative lenders, as traditional banks typically require strong credit.

Lenders may rely on other factors, such as cash flow, collateral, or business performance, to assess eligibility. While they can provide crucial funding for operations or growth, bad credit business loans usually come with higher interest rates and fees due to the perceived risk.

Managing these loans responsibly can build credit scores over time, helping businesses qualify for better financing options in the future.

What Is Considered Bad Credit?

Your personal credit score, a rating derived from your credit history, is an important indicator of your creditworthiness to lenders. Similarly, when your business builds up a credit history, it may receive a credit score that potential lenders can use to assess whether to lend it money.

If your credit rating isn’t high enough or your business hasn’t been in existence long enough to build up a credit history, potential lenders may evaluate you as having bad credit or no credit, and it may be harder for you to get good terms on financing or even any financing at all.

Understanding what lenders may be looking for can help you figure out your best options for getting business loans for bad credit.

Personal Credit vs. Business Credit

A common question when you’re trying to figure out how to apply for a business loan with bad credit is whether a lender will look at your personal credit score or your business credit score.

Personal credit is based on your individual credit history, including factors such as your record of borrowing and repayment on items like credit cards and loans. It’s connected to your Social Security number (SSN) and includes specific details regarding any credit-related inquiries. Your credit score is used to sum up how creditworthy you are so that potential lenders can assess how risky loaning money to you might be.

Most personal credit scores range from 300 to 850 (although there are a few different scoring models with slightly different scales). Less than 580 is typically considered a poor score.

Business credit scores may be issued by several different companies with different systems. Some (though not all) range from 1 to 100, and higher scores are typically viewed more favorably by lenders. The scores are generally determined by factors that can include payment history, business history, credit utilization ratio (how much the business currently owes divided by its credit limit), and type of industry.

Every lender may have its own rules, but in general, on a scale of 1 to 100, a business credit score of 80 or above means that the business is likely to be seen as low risk, while a score of 49 or below may suggest high risk to potential lenders.

Recommended: Small Business Loans for Sole Proprietors

Why Your Personal Credit Score May Matter for a Business Loan

Many businesses start out with a sole proprietor — just one person who owns the business. When the business is new and hasn’t had the chance to build up a credit history yet, potential lenders may look at the owner’s personal credit when they’re assessing the business’s creditworthiness. A majority of lenders will consider your FICO® score (the credit score issued by the Fair Isaac Corporation) when evaluating an application for a small business loan.

While FICO has different versions of its credit scores for different purposes, personal FICO credit scores are generally determined using the following factors:

•  New credit – 10%

•  Credit mix – 10%

•  Length of credit history – 15%

•  Accounts owed – 30%

•  Payment history – 35%

Every personal credit score uses these five categories, but the importance of each can vary depending on the individual. For example, a person with a long credit history will be evaluated differently than someone who is just beginning to establish credit.

Lenders use multiple factors to determine what small business financing options they want to offer you. But even though your credit score is just one factor, lenders may have minimum personal credit score requirements to qualify for loan products. That’s why it can be useful to know what your personal credit score is and whether it’s considered good or bad when you’re applying for a business loan.

Banks and SBA-approved lenders generally require credit scores over 680 to qualify for a small business loan. Alternative lenders, like those who offer options like merchant cash advances or factoring services, may accept lower credit scores (below 600), but you may face higher total borrowing costs due to increased interest and factor rates.

Recommended: What Factors Affect Your Credit Score?

How to Apply for a Business Loan With Bad Credit

Getting a business loan with a lower credit score may require a bit more legwork. There are five steps to applying for a business loan with less than stellar credit.

Check Your Credit Scores

To find your personal credit score and history, you can request a credit report from any of the major bureaus: Equifax®, Transunion®, or Experian®. The Fair Credit Reporting Act (FCRA) entitles individuals to one free copy of their credit report per year from each of the three bureaus.

When you’re looking into a bad credit business loan and you want to know your business credit rating, however, digging that up may be more challenging than finding your personal credit rating. The following sources may offer comprehensive business credit ratings, but keep in mind that some are paid services: Dun and Bradstreet®, Experian, and Equifax.

After you’ve gathered your credit reports and scores, you’ll probably be better prepared to determine how eligible you are for financing by comparing your ratings against potential lenders’ minimum requirements.

Recommended: What Is the Minimum Credit Score for a Business Loan?

Research Lenders

Researching lenders is crucial when applying for a bad credit business loan to ensure you find the best terms and avoid predatory practices. Different lenders offer varying interest rates, fees, and repayment conditions, which can significantly impact your business’s finances.

Comparing options helps identify reputable lenders who specialize in bad credit loans and assess their flexibility in evaluating factors like cash flow or collateral.

Review Terms

Reviewing loan terms when applying for a bad credit business loan is critical to avoid unexpected financial strain. Terms like interest rates, repayment schedules, fees, and prepayment penalties significantly impact the total cost of the loan and your cash flow.

Bad credit loans often come with higher costs, so understanding these details ensures you’re not agreeing to unfavorable terms.

Prepare Documentation

When you’re planning to apply for bad credit business loans, it may help to gather the following documents:

•  Personal and business credit reports

•  Business bank and financial statements

•  Legal documents related to your business

•  Business and personal tax returns

•  Personal identifying documents

•  Business plan

Some lenders may not require all of these documents, but having them all ready in case they’re needed can be helpful. In fact, some lenders may even require additional documentation. And while you’re gathering this paperwork, it can also be a good opportunity to assess your business’s financial status, too.

Recommended: What Are Business Consolidation Loans?

6 Steps That Can Improve Your Chances of Getting a Business Loan

Working toward a higher credit score can take time, but a strong credit score may better your chances of securing a more competitive interest rate on a small business loan. The following steps can help you improve your chances of getting a small business loan.

1. Check Your Credit Reports and Dispute Any Errors

It’s important to monitor your personal and business credit scores to ensure there aren’t any incorrect entries. An error on your credit report could lower your score, making it more difficult for you to secure the financing your business needs.

Check your personal credit reports with the three major credit bureaus (TransUnion, Experian, and Equifax) and report any potential errors directly to that bureau. You can access a copy of each of these credit reports for free once annually.

You may also want to check your business credit history with Dun and Bradstreet, Experian, and/or Equifax. The sooner you can catch and correct any discrepancies, the sooner you can improve your chances of getting approved for funding.

2. Establish Credit With a Business Credit Card or Line of Credit

One way you can work toward building your business credit score is by using a business credit card to make small daily purchases. To help build credit, it’s important to pay your business credit card bill on time each month and avoid carrying a balance.

If you qualify for it, another option that may help you build business credit is taking out a business line of credit. Like a credit card, a credit line lets you take out available credit to make purchases and then pay it off in full each month.

And finally, consider keeping your business credit card or line of credit accounts open, even if you aren’t using them. Canceling a business credit card could impact your business credit score.

3. Keep Your Business Expenses Separate from Personal Expenses

There are a number of reasons to keep your business and personal expenses separate. These include building credit, keeping your records accurate, and streamlining your taxes, as well as for the legal implications. Whether you’re just starting your business or trying to build good credit, these steps can help you establish and maintain a separation between your business and personal expenses:

•  Open and maintain separate business and personal bank accounts

•  Avoid using your business credit card for personal expenses and vice versa

•  Register your business with an EIN number

•  Hire a bookkeeper to manage accurate accounting for your business

4. Maintain Your Personal Credit Score

Can you get a loan with a 500 personal credit score? It may be difficult, which is why it’s important to maintain strong personal credit if it’s at all possible.

Even though your business and personal credit are separate ratings, having a good personal credit score may improve your chances of getting approved for a business loan. When lenders see strong personal credit, it highlights that you’re a trustworthy borrower. One way to help build and maintain a good personal credit score is to pay your credit cards and other outstanding debts on time.

5. Take the time to build credit

Trying to figure out how to apply for a small business loan with bad credit and no collateral can be frustrating. Building credit may take a while, but it’s usually worth the effort. That’s because a strong credit history can help you get favorable rates and terms on future loan products.

For starters, you can aim to work with vendors and suppliers who will report your business dealings to the major credit bureaus. Paying your outstanding balances and invoices on time can also potentially help you establish and build better business credit. But keep in mind that not all companies will report on your behalf, and try to choose judiciously.

If you’re able to wait to apply for a loan, delaying your application could be an opportunity to continue paying down other debts and credit cards, or make any other regular payments that show a stable financial history. By taking the time to build a good track record, you can prove your dependability as a borrower and potentially improve your chances of being approved for more favorable loan products in the future.

Recommended: 10 Strategies for Building Credit Over Time

6. Diversify your credit

Creating a good credit mix is an important step in building good business credit. A mix of credit means that you have varied lines of credit, credit cards, loans, and other products. Once you’ve established good business credit, having a well-rounded credit mix can help you maintain or potentially build your credit score, so long as you’re responsibly making payments on each account.

Another factor to keep in mind is your credit utilization ratio. This is how much available credit you’re using. Maxing out every line of credit may present a negative picture of your business, while using around 25% of your credit typically suggests that you’re a responsible borrower.

Types of Alternative Bad Credit Business Loans

Besides traditional term loans, there are other financing options available to you, even if you have low credit or no credit.

Secured Business or Personal Credit Cards

When you get a secured credit card, you have to provide a security deposit to open the card. That deposit acts as collateral in the event you default on your payments. This lessens the risk for the credit card company, and therefore improves your chances of getting approved.

If you are looking for a startup business loan with bad credit and no collateral, opening a secured personal or business credit card may be an option to consider. If you make payments on time for a certain period, your creditor may even offer you an unsecured card to help build up your credit rating further.

Recommended: Unsecured Business Loans

Peer-to-Peer (P2P) Lending

Peer-to-peer lending lets borrowers and investors connect directly, eliminating the need for a financial institution to facilitate the loan process. Borrowers who are trying to get unsecured business loans with bad credit or whose business is new may find more financial options to choose from in this category than from other kinds of lenders.

Borrowers and lenders use P2P networks to find each other based on business needs, purpose, and qualifications. Fund transfers and payments go directly through the P2P platform for a simple, manageable process. Because you work with an investor directly, there may be more emphasis placed on your business’s purpose and long-term goals.

Equipment Financing

Equipment financing can help you purchase necessary equipment, machinery, and other items for your business. Equipment financing may be a viable loan option for a business with a low credit score or limited collateral because the equipment itself acts as collateral. In other words, if you default on your payments, the lender can claim the equipment to recoup its losses.

Equipment financing can help you purchase big-ticket items without the financial strain of paying a lot of money all at once. The terms on loans like these may range from a few months to 10 years, and generally vary based on the lifespan of the equipment.

Invoice Factoring

A short-term financing option known as invoice factoring lets you sell your invoices to a factoring company, which assumes responsibility for collecting payments from your customers. Typically, B2B companies or operations with irregular billing cycles rely on this type of financing.

Businesses may use invoice factoring as a quick way to supplement cash flow or when they need a bad credit business loan. Since the factoring company is responsible for collecting payment from your customers, it’s important to partner with a company that’s reputable and uses fair collection practices.

Inventory Financing

Inventory financing helps a business maintain cash flow while it’s purchasing additional inventory, typically in preparation for a seasonal spike. That new inventory serves as collateral, and lenders offer financing based on a percentage of its value. This can be a good option if you don’t have collateral and need funds to stock up on inventory.

Microloans

Microloans are loans offered by nonprofit and peer-to-peer organizations for smaller loan amounts, typically less than $50,000. If you require just a small amount of financing and don’t qualify for a larger loan, a microloan may help you get the funding you need to cover basic startup costs and other business expenses.

Since newer, smaller businesses often seek microloans and haven’t yet established business credit, it’s helpful to have an established personal credit history to help the lender make its financing decisions.

SBA microloans are also available and may have advantages like longer terms and better interest rates, but they require a strong credit rating.

Merchant Cash Advance

A merchant cash advance is not actually a loan, but a way for a small business (“merchant”) to get a cash advance for business expenses in return for a portion of its future credit or debit card sales. Merchant cash advance companies purchase a business’s future sales at a discount and, in return, offer quick financing.

A business owner trying to get an unsecured business loan with bad credit may find that merchant cash advances are an option for quick cash, but they do often come with high interest rates and fees.

Additionally, since merchant cash advances are not technically loans, companies don’t receive the same governmental oversight and regulation as traditional lenders. If you decide to go with this option, research the different merchant cash advance companies carefully to ensure that the one you choose operates in a fair and trustworthy manner.

The Takeaway

Securing a business loan with bad credit can be challenging, but it’s not impossible. By exploring alternative lenders, leveraging collateral, or working with a cosigner, you can improve your chances of approval.

If you’re seeking financing for your business, SoFi is here to support you. On SoFi’s marketplace, you can shop and compare financing options for your business in minutes.

With one simple search, see if you qualify and explore quotes for your business.

FAQ

Can I get a business loan with no collateral?

Yes, there are some business loan options that don’t require collateral, particularly from online lenders. However, that’s not the case for all small business loans. Some will require collateral to qualify, especially if you don’t have strong credit. There are also other lending options that essentially have collateral built into their structure, including equipment financing and secured credit cards, which you may want to consider if you have no other form of collateral to offer.

Can I get a business loan with bad personal credit?

Yes, there are options for securing business funding, even if you have bad credit. While many lenders look at your personal credit to help determine your eligibility and loan terms, some alternative lenders and online business loans may be available to people who are still building their personal credit. Lenders offering certain other products, like merchant cash advances and invoice factoring, will also consider individuals with bad credit.

Are any banks easier to get a business loan at than others?

Banks differ in their evaluation criteria. However, since interest rates began to rise, U.S. banks have been tightening their criteria. They have typically expected higher credit ratings, longer time in business, and more income generated every month before giving a term loan.

Are all business loans based on credit scores?

Not all business loans are based solely on credit scores. While traditional lenders prioritize creditworthiness, alternative lenders often consider factors like cash flow, revenue, and business potential, offering options for businesses with lower scores or no credit history. However, stronger credit typically improves loan terms and approval chances.

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About the author

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SoFi's marketplace is owned and operated by SoFi Lending Corp. See SoFi Lending Corp. licensing information below. Advertising Disclosures: SoFi receives compensation in the event you obtain a loan through SoFi’s marketplace. This affects whether a product or service is featured on this site and could affect the order of presentation. SoFi does not include all products and services in the market. All rates, terms, and conditions vary by provider.

This content is provided for informational and educational purposes only and should not be construed as financial advice.

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.


Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

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If you are looking to start a nonprofit or planning to expand an existing one, you’ve got options for financial help. While larger organizations may have an easier time securing grants and corporate sponsorships, there are many other funding sources for smaller nonprofits or ones that are just starting out. Here’s a look at how to get funding for a nonprofit of any size.

Why Do Nonprofits Need Funding?

While having a tax-exempt status can certainly help an organization save money, nonprofits still have a variety of costs they need to cover. Not-for-profit organizations typically need reliable revenue streams to fund their missions, develop education programs, and cover their day-to-day expenses (including rent, utilities, salaries, and supplies).

At the same time, nonprofits need to be careful about how they “earn” money. In order to maintain a 501(C)(3) status, any earned income needs to be directly related to the organization’s mission. Many nonprofits meet their budgets through a combination of external funding (e.g., donations and fundraising initiatives) and self-generated funds (e.g, sales of merchandise, fees charged for services, and membership fees).

Types of Nonprofit Funding Sources

There is a wide array of financial sources for a nonprofit, ranging from government grants and private foundations to membership fees and donation crowdfunding.

There’s no one-size-fits-all approach to nonprofit funding sources. Some methods might work for you that wouldn’t be a good fit for others, or something that hasn’t worked in the past could be a good option for your organization at this point in its growth.

Recommended: Guide to Crowdfunding for Small Business

Building a Robust Funding Strategy

Most nonprofits turn to funding from grants. They are often available from the government at the local, state, and federal levels, as well as from business associations, corporations, and foundations. While grants are essentially free money, they sometimes come with specific conditions as to how exactly you can use the money. Also, competition for these awards can be stiff.

When searching for grants, you can check Grants.gov, which is the largest database of federal grant opportunities. You may also want to look locally, as many grants targeted for nonprofits are offered at the state and local level.

You can find grants targeting entrepreneurs:

•   Small business grants for minorities

•   Grants for women-owned businesses

•   Grants and loans for Hispanic-owned businesses

•   Small business grants and loans for veterans

Grants, however, can’t do it all. A smart funding strategy can guide you, laying out a roadmap for you to follow at every stage of the fundraising process.

Crafting a Mission Statement

Your mission statement serves as a clear representation to those outside of the organization of your vision. It’s an essential tool for promoting and positioning your nonprofit organization in the minds of others. Be sure to communicate the “whys” to your nonprofit and include action items for what can be accomplished. When it comes to the writing tone, use conversational language.

Grant Writing and Application Techniques

Even a startup nonprofit can qualify for a grant. To hope to succeed in receiving a grant, however, small business owners must submit a proposal that aligns with the mission of the funders or government agencies that have the funding. Proposals require clear, concise writing, a strong executive summary, and a well developed project description.

The most important thing you can do when writing a grant proposal is tailor your grant specifically for the grant package in front of you. Follow its instructions carefully and in order. This includes any instructions on format, style, and timeframe.

While it’s key to clearly define success scenarios, don’t forget that you are essentially writing a compelling story that will outline the impact of your business on people’s lives.

Donor Cultivation and Relationship Management

Individual donations are often one of largest sources of funding for nonprofits, so it can be smart to make individual donors a key focus of your fundraising efforts.

If you don’t have one already, you’ll want to create an online donation page that enables recurring donations.

Some ways to increase the support you get from individuals include:

Promoting your cause on social media

•   Leveraging text-to-give campaigns

•   Asking for donations at community events

•   Mailing out fundraising materials

•   Hosting charity events

•   Organizing peer-to-peer (P2P) fundraisers

Alternative Funding Sources

There are many different types of crowdfunding, but the one most used by nonprofits is donation-based crowdfunding, which works by asking large amounts of people to donate small amounts of money. You can launch a crowdfunding campaign to raise money for a specific program within your organization or as a general donation to the cause. Crowdfunding can also dovetail with your social media campaigns and simplify online giving for your donors.

While donation crowdfunding can be a low-cost and effective way to reach potential supporters all over the world, keep in mind that crowdfunding platforms typically charge fees and it can take a fair amount of time and effort to create a compelling and successful crowdfunding campaign.

Membership fees can also create a reliable, recurring source of revenue for your nonprofit. The structure can vary depending on your organization’s mission and target audience, but many nonprofits offer some sort of incentive to encourage potential members to join, such as online name recognition, a free subscription to your organization’s magazine or newsletter, or discounted tickets to events.

Membership also creates a sense of community and ownership among your supporters, which might encourage them to promote your nonprofit on your behalf.

Unlike other forms of fundraising, earned income comes from the sale of products or services. Nonprofits can generate revenue by selling merchandise (such as t-shirts), offering instructional classes, selling tickets to events, creating and selling publications, or renting out their spaces for events. Just keep in mind that earned income must be related to the mission of the organization or it can be taxed as unrelated business income.

If you’re thinking about selling products or services to raise money for your nonprofit, it can be a good idea to consult a tax specialist who routinely works with nonprofits for guidance.

Legal and Compliance Considerations

Fundraising is governed by a mix of state and federal regulations. These laws are designed to protect donors, the general public, and charities themselves from fraud and from misleading practices.

When you secure 501(c)(3) status from the Internal Revenue Service, your nonprofit becomes a recognized fundraising organization at the federal level. However, charitable solicitations themselves are regulated at the state level. This means that you must register to fundraise in the state jurisdictions where your nonprofit actively solicits its donations.

Compliance with these rules and regulations helps maintain public trust in the nonprofit sector. Violations can lead to loss of credibility and trust among potential donors​​. Non-compliance can lead to legal consequences, including fines and, in serious cases, the shutdown of fraudulent charities​​.

Which Funding Sources Are the Right Fit for Your Nonprofit?

The right fundraising model for your nonprofit will depend on its size and mission. Here are some steps that can help you home in the best sources of funding for your cause.

1.;  Analyze your current approach to funding. Do your current nonprofit funding sources deliver a good return on investment? Are they all aligned with your mission, vision, and values? Is there room to add other funding sources? Are there some you may want to move away from?

2.;  Explore your options. You may want to look at the funding approaches of other similar nonprofits. Are they doing something that could work for you? Also consider having a brainstorming session with your team, inviting them to get creative and think outside the box.

3.;  Make a short list of feasible options. Once you have a list of possible new funding streams, you’ll want to narrow it down to options that are sustainable and replicable. Once you have a short list, you can evaluate how much each nonprofit funding source will cost, and how much money your organization could feasibly garner from each one.

4.;  Select funding model(s) to implement. Based on the information you’ve gathered in the above steps, you’ll next want to decide on one or two funding models to implement and develop a plan to put these models into action.

Recommended: 7 Differences Between Business Grants and Loans

The Takeaway

Nonprofit funding can come from a variety of sources, and many organizations rely on multiple revenue streams to pay their bills and keep their programs funded. For example, one nonprofit might be funded 40% through grants, 40% through events, and 20% through a membership program. Another might be 70% funded through donations, 20% through grants, and 10% through events.

If you’re seeking financing for your business, SoFi is here to support you. On SoFi’s marketplace, you can shop and compare financing options for your business in minutes.

If you’re seeking financing for your business, SoFi is here to support you. On SoFi’s marketplace, you can shop and compare financing options for your business in minutes.

With one simple search, see if you qualify and explore quotes for your business.

FAQ

What is the biggest source of funding for reporting nonprofits?

For many nonprofits, the majority of their funding comes from individual donations.

What are the 4 types of nonprofits?

A nonprofit organization can structure itself in one of four ways: an unincorporated association, a trust, a corporation, or a limited liability company (LLC).
H3: How do you start a nonprofit without any money?

To start a nonprofit with no money, you’ll need to write a business plan, build a board of directors, find an online fundraising tool that’s free to start, gather donations (from friends, family, and board members), find an attorney willing donate their services to help you register your nonprofit, and plan free and low-cost of fundraising events.

If I am the founder of a nonprofit, can I pay myself?

It is legal for nonprofit founders and officers to receive a salary for their work for the nonprofit. As a founder, you can pay yourself a salary, but it has to be in line with the work you’re doing and the amount of hours you’re putting in.

Are nonprofits taxed?

Nonprofit status may make an organization eligible for certain benefits, such as state sales, property, and income tax exemptions; however, this corporate status does not automatically grant exemption from federal income tax.

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Photo credit: iStock/South_agency

SoFi's marketplace is owned and operated by SoFi Lending Corp. See SoFi Lending Corp. licensing information below. Advertising Disclosures: SoFi receives compensation in the event you obtain a loan through SoFi’s marketplace. This affects whether a product or service is featured on this site and could affect the order of presentation. SoFi does not include all products and services in the market. All rates, terms, and conditions vary by provider.

This content is provided for informational and educational purposes only and should not be construed as financial advice.

This article is not intended to be legal advice. Please consult an attorney for advice.


Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.


Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

SoFi receives compensation in the event you obtain a loan, financial product, or service through SoFi’s marketplace. This webpage is owned and operated by SoFi Lending Corp., licensed by the Department of Financial Protection and Innovation under the California Financing Law, license number 6054612; NMLS number 1121636. ((www.nmlsconsumeraccess.org)). This page is NOT operated by SoFi Bank. Loans, financial products, and services may not be available in all states. All loan terms, including interest rate, and Annual Percentage Rate (APR), and monthly payments shown through SoFi’s marketplace are from providers and are estimates based upon the limited information you provided and are for informational purposes only. All rates, fees, and terms are presented without guarantee and are subject to change pursuant to each provider’s discretion. Estimated APR includes all applicable fees as required under the Truth in Lending Act. The actual loan terms you receive, including APR, will depend on the provider you select, their underwriting criteria, and your personal financial factors. The loan terms and rates presented are provided by the providers and not by SoFi Lending Corp. Please review each provider’s Terms and Conditions for additional details.

*Small Business Loans: Reference to “same day funding” or “funding within 24 hours” describes a general capability of many lenders you can reach through SoFi’s marketplace. Funding or funding timing is not guaranteed. Your experience with any lender will vary based on requirements of the lender and the loan you apply for. To determine the timing of funds availability, you must inquire directly with any lender. In addition, your access to any funds from a loan may be dependent on your bank’s ability to clear a transfer and make funds available.

†Credit score impact: To check the options, terms, and/or rates you may qualify for, SoFi and/or its network providers will conduct a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, the provider(s) you choose will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit. Rates may not be available from all providers.

©2025 SoFi Lending Corp. All rights reserved.

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If you own a small business, one of the smartest ways to boost your profits is to make sure you are taking all the deductions you are entitled to on your taxes.

Doing so can lower your taxable income and allow you to hold on to more working capital for your business.

But the U.S. tax code for small businesses is fairly complicated and does get revised often. It’s important to stay up to date on these changes.

The good news is that there are several tax credits available if you make your business facilities more energy efficient or purchase an electric vehicle to be used for business. Read on to learn the latest.

What Are Small Business Tax Deductions?

Small business tax deductions (or write-offs) are business-related expenses that you can subtract from your taxable income.

According to the Internal Revenue Service (IRS), business expenses must be both ordinary and necessary to be considered deductible. An expense is “ordinary” if it’s common and accepted in your trade or business. An expense is “necessary” if it’s helpful and appropriate to your business. An expense generally doesn’t have to be indispensable, however, in order to be considered necessary.

Many types of qualified business expenses are specifically addressed on the tax return, with a line to enter the deductible amount. Other qualified expenses can be listed separately.

How Do Small Business Tax Deductions Work?

Virtually all businesses have to file a tax return with the IRS, but how much you’ll pay in taxes generally depends on how much your business has earned after qualified expenses have been deducted.

A small business tax deduction is an expense that you can deduct from your income to reduce your federal and state tax bill. A business could earn plenty of revenue and potentially pay no taxes if its deductions and credits reduce its taxable income to zero.

If your business brought in $150,000 in revenue, for example, but you had $50,000 in tax-deductible business expenses, you would then only be taxed on $100,000 of revenue, which could save you many thousands of dollars compared to what you’d owe on $150,000.

A 100% tax deduction is a business expense of which you can claim the entire cost on your income taxes. In some cases, however, you may only be able to claim a portion of the expense on your tax return.

General Rules for Deduction Eligibility

In preparing your business’s tax return, it’s important to understand the eligibility requirements for each deduction before you claim it. The IRS’s rule of thumb is mentioned above: A business deduction is allowable if the cost is “ordinary and necessary” for your industry.

Items that are tax-deductible for small business fall into the categories of direct expenses, indirect expenses, and interest on debt. However, the IRS rules out certain specific expenditures, including real estate renovations, social club dues, and political contributions. Fines and certain legal settlement payments are also not deductible.

Claiming a small business tax write-off that you’re not eligible for could lead to an audit and possibly a penalty.

Recommended: How Much Does It Cost to Start a Small Business?

22 Small Business Tax Deductions

Whether you’re just starting a small business or your company is already well established, here is a list of write-offs that may be available to you. It can be a good idea to consult a tax professional, like a CPA, to find out which small business tax tips are appropriate for your situation.

1. Advertising and Promotion

The cost of advertising and promoting your business is typically 100% deductible. This can include costs related to hiring someone to design a business logo, launching your website, buying ad space in print or online media, running a social media marketing campaign, or sponsoring an event.

2. Car Expenses

If you use your car for business activities, such as driving to see a client or going to the store to buy office supplies, the costs may be tax deductible as long as you keep track of the mileage. The deductible mileage rate for tax year 2024 is 67 cents per mile. For 2025, the rate is 70 cents per mile.

If you have only one vehicle and use it for both personal and business needs, you will likely need to separate the mileage in order for car expenses to be considered a self-employed tax deduction.

3. Energy-Efficient Improvements

Thanks to the Inflation Reduction Act, qualifying small businesses can receive a tax credit that covers 30% of the cost of switching over to low-cost solar power — lowering operating costs and protecting against the volatile energy prices that are currently squeezing small businesses.

Small business building owners can receive a tax deduction of up to $5.65 per square foot (for tax year 2024) to support energy efficiency improvements that deliver lower utility bills.

4. Purchase of an Electric Vehicle

If you bought a new, qualified plug-in electric vehicle (EV) in 2023 or after, you may be eligible for a clean vehicle tax credit up to $7,500 under Internal Revenue Code Section 30D. You may be able to claim it by buying a qualified new car or light truck. The credit is available to individuals and businesses.

The maximum credit is $7,500. It is nonrefundable, so you can’t get back more on the credit than you owe in taxes. You can’t apply any excess credit to future tax years.

5. Child Care Facilities for Employees

If you provide child care for your employees either on-site or through a contract with an outside facility, you could be eligible for the Credit for Employer-Provided Childcare Facilities and Services. The credit is available for 25% of the care facility expenditures plus 10% of the resource and referral costs. It’s capped at $150,000 per tax year. You would claim it by filling out Form 8882.

6. Bad Debt Write-Offs

If you loaned money to an employee, client, or supplier and it wasn’t paid back, or if you made credit sales to customers that were never paid, you may be able to claim the outstanding debt as a business tax deduction.

Typically, to write off these debts, you need to have proof that it was indeed a business debt and not a personal loan.

7. Business Meals

Do you take clients (or potential clients) out for meals to discuss business? If so, these costs may be 50% tax-deductible. The snacks and meals you buy for your employees are also typically 50% deductible. Food provided at company parties is generally 100% deductible.

In order to be eligible, food costs typically need to be reasonable — extravagant meals likely won’t qualify. They must also be available to the whole staff, not just highly compensated employees.

8. Business Insurance Premiums

You likely have at least one type of insurance coverage for your company and/or your staff. That might be workers’ compensation, liability, property, or data breach insurance. If the type of insurance is considered ordinary and necessary, you can typically write off 100% of your policy premiums.

9. Business Loan Interest

If you’ve taken out loans for business purposes, including lines of credit and mortgages on business real estate, or if you’ve used business credit cards, the interest you pay on those loans may be 100% tax-deductible.

10. Payments to Contractors and Freelancers

If you hire freelancers or independent contractors to help in your business, you may be able to deduct their fees as a business expense. You may also want to keep in mind that if you pay a contractor $600 or more during the tax year, the IRS typically requires you to submit a Form 1099-NEC to both the IRS and the contractor.

11. Education and Training Expenses

If you invest in furthering your knowledge and expertise to give you a leg up in the market, or provide your employees with educational benefits, you may be able to write off some of these costs as business expenses.

Tax-deductible education expenses can include: classes and workshops intended to improve skills in your field, subscriptions to professional publications, attending industry seminars and webinars, and getting business certifications.

12. Equipment Depreciation and Section 179 Deductions

Depreciation is a way of spreading the cost of business equipment or assets over time. It essentially measures how much an asset’s value has been used up or exhausted during the year.

Items that can be depreciated by small business typically include computers and other office equipment, machinery, office furniture, and business vehicles. For more specifics, you can read “Topic No. 704,” a document about depreciation, at the IRS website.

13. Business Gifts

If you give clients and prospects gifts as part of your business, the IRS generally permits you to deduct up to $25 per person per year. Any amount you spend over the $25 limit is not deductible.

A gift given to a member of a client’s family is also typically looked at as a gift to the client, unless you have a personal connection to the family member.

14. Home Office Deduction

Do you run your business out of your home? If so, you may be able to deduct expenses tied to creating and maintaining that workspace.

To qualify for the home-office tax deduction, you generally must utilize part of your home regularly and exclusively for business. The office does not need to be in a separate room, but it must be in a space solely designated to work and business operations.

You can typically deduct home office expenses in one of two ways: simplified (in which you multiply a specified rate by the square footage you use for your business, up to a maximum deduction of $1,500) and regular (which involves you itemizing expenses for home office use, including mortgage interest, rent, insurance, utilities, and depreciation).

15. Legal and Professional Fees

If your business has incurred legal expenses, such as hiring a business lawyer or going to court, you are generally able to deduct them as a business expense. Even if you go to court and do not win the case, those legal fees will likely qualify for deduction.

The legal expenses incurred, however, typically must be considered ordinary and necessary to the business in order to be considered a tax write-off.

Also, expenses you may incur when hiring professionals like bookkeepers, accountants, and tax preparers for your business are generally deductible.

16. Office Supplies and Business Tools

Every pen, sheet of paper, and toner cartridge you purchase for your business can typically be written off on your taxes.

For supplies to be deductible, they generally need to be considered essential to running and maintaining a functional office. It can be a good idea to keep receipts and categorize these small business expenses as you go. This can make it easier to file your taxes at the end of the year.

17. Professional Memberships and Subscriptions

Any expenses related to obtaining or maintaining professional licenses or memberships in an industry organization may be deductible.

18. Rent for Business Premises

If you pay rent for an office, warehouse, retail space, or other type of business property, that monthly rent expense may be fully tax-deductible. If you deduct rent as a business expense, you will typically not be able to take the home office deduction as well.

19. Salaries and Employee Benefits

As long as they’re not for you or other business partners, employee salaries and benefits are generally considered write-offs for small businesses.

This category typically includes employee wages, paid time off, commissions, and bonuses, as well as employer-sponsored life insurance or retirement account contributions.

20. Startup and Organizational Costs

If you started your business in the latest tax year, you may be able to write off up to $5,000 of the expenses you invested in launching.

Startup expenses generally include any costs incurred to create or buy the business, such as expenses related to marketing, travel, training, and forming a corporation or partnership.

21. Phone and Internet Expenses

Generally, what you spend to provide your business with internet and phone service can be written off in order to lower your tax liability. If you use the phone and internet for a mix of work and personal reasons, however, you can typically only write off the percentage of the cost that goes toward your business use.

22. Business Travel and Lodging

If you travel for work, such as to visit clients or attend industry events, your travel expenses may be considered business tax write-offs. This can include transportation (flight, rental car, train, parking, and tolls), hotel stays, and meals.

How to Claim Small Business Tax Deductions Effectively

To prevent missing out on credits and deductions, you could likely benefit from hiring a skilled accountant. Your accountant should be able to identify all the expenses you can deduct. You may already be familiar with some — such as the rent you pay for your home office, interest on business loans, and travel costs — but there may be many others that fit your particular case.

Keeping careful financial records, including receipts, should help ensure your accountant has all the needed documentation come tax time. Between filings, if you are considering a costly business move, it’s wise to check in with the accountant beforehand to learn about any tax breaks you might be able to claim.

Common Mistakes to Avoid When Filing Business Taxes

Plenty of small business owners make mistakes when filing their company’s tax return. Here are some to watch out for:

•   Neglecting to separate personal and business finances. This complicates recordkeeping and tax filing.

•   Failing to track expenses accurately. Without accurate accounting, you may miscalculate your estimated taxes.

•   Overlooking available deductions and tax credits your business qualifies for. Some examples might be home office expenses or depreciation.

•   Delaying or skipping quarterly estimated tax payments. Paying these on time can help you avoid penalties for lateness and underpayment.

•   Not setting aside money to pay quarterly federal, state, and self-employment taxes. To cover these tax bills, it’s a good idea to escrow 30% to 40% of your net income per year.

The Takeaway

One of the simplest ways to reduce your income tax bill is to ensure you’re claiming all of the tax deductions available to your small business. Understanding which business expenses qualify can help you avoid overpaying come tax time. It can also help guide your business decisions throughout the year and help you decide if it’s time to explore small business financing.

If you’re seeking financing for your business, SoFi is here to support you. On SoFi’s marketplace, you can shop and compare financing options for your business in minutes.

With one simple search, see if you qualify and explore quotes for your business.

FAQ

What qualifies as a small business tax deduction?

The IRS says that a small business expenditure qualifies as a tax deduction if the expense is both ordinary and necessary. An expense is “ordinary” if it’s common and accepted in your trade or business. An expense is “necessary” if it’s helpful and appropriate to your business.

How can I maximize my business tax deductions?

In order to maximize your business deductions, it’s likely a wise move to hire a tax professional, such as an accountant or attorney. They are likely to have the best grasp of all the deductions you’re eligible for, because they stay up to date on the tax statutes and IRS guidance.

Are home office expenses fully deductible?

Home office expenses are generally deductible if your work area meets the IRS requirements: a designated space in your home that’s used regularly and exclusively for business operations. If you qualify for this deduction, you could fully write off direct expenses such as rent and utilities – but only the percentage that applies to your home office.

If you opt for the IRS’s simplified calculation method, the maximum home office expense deduction is $1,500.

Can I deduct business meals and entertainment?

Restaurant meals with clients and in-office lunch or snacks you buy for your employees are typically 50% deductible. Food provided at company parties is ordinarily 100% deductible.
Overall, the food must be reasonably priced and available to the whole staff.

As for entertainment, you generally can’t deduct any expenses for those events.

What records do I need to keep for tax deductions?

You’ll likely benefit from tracking your business activity in your ledger or accounting software. Per the IRS, your records should show your gross income and your purchases, sales, payroll, and other transactions.

Keep all documents that support your deduction claims. Supporting documents include sales slips, paid bills, invoices, receipts, deposit slips, and canceled checks.

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Photo credit: iStock/Moon Safari

SoFi's marketplace is owned and operated by SoFi Lending Corp. See SoFi Lending Corp. licensing information below. Advertising Disclosures: SoFi receives compensation in the event you obtain a loan through SoFi’s marketplace. This affects whether a product or service is featured on this site and could affect the order of presentation. SoFi does not include all products and services in the market. All rates, terms, and conditions vary by provider.

This content is provided for informational and educational purposes only and should not be construed as financial advice.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.


Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

SOSMB-Q125-022

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When you’re thinking of starting a new business, there are plenty of possibilities to consider. But what if you don’t have a large startup budget ready to go? Doesn’t that limit your dreams?

Not necessarily. Whether you’re trying to launch a side hustle to supplement your day job or you just want to be your own boss, there are many businesses you can start that don’t require huge sums of money.

Explore this list of some of the best small business ideas for 2025. The sooner you get started, the sooner your small business might be the next great success story.

How to Choose the Right Small Business Idea for You

Choosing the right small business idea requires assessing your skills, interests, and market demand. Start by identifying your strengths and passions, then research industry trends and profitability. Consider these key factors:

•   Personal skills and interests: Choose a business that aligns with what you enjoy.

•   Market demand: Research if there’s a strong customer base.

•   Startup costs: Ensure you have the resources needed.

•   Scalability: Think about long-term growth potential.

•   Work-life balance: Consider how it fits your lifestyle.

By evaluating these factors, you can select a business idea that suits you and has the potential for success.

Low-Cost Small Business Ideas vs. High-Investment Ventures

When starting a business, entrepreneurs must decide between low-cost small business ideas and high-investment ventures. Low-cost businesses, such as freelancing, consulting, or online reselling, require minimal upfront expenses and can often be run from home. These businesses typically have lower financial risk and offer flexibility, making them ideal for first-time entrepreneurs.

High-investment ventures, such as opening a restaurant or launching a manufacturing business, demand significant capital for equipment, inventory, and operational costs. While these businesses may offer higher revenue potential, they also come with greater financial risk. Choosing the right path depends on budget, risk tolerance, and long-term goals.

Recommended: 10 Steps for Starting a Small Business

1. Online Fitness Trainer

At-home workouts became popular during the pandemic, and it continues to be a favorite go-to for many busy people who want to exercise. If you’re a fitness expert, you may be able to launch an online training business. An easy way to get started and build an audience is by making videos to post on YouTube or sell as a course.

•   Potential salary: $30,000 – $80,000 per year

•   Qualifications: Experience and certifications

Recommended: How Much Does It Cost to Start a Business?

2. Web Developer

Developing websites — building and maintaining their core structure — is a technical skill that’s in high demand. It’s also a skill that you can teach yourself through videos, online lessons, and books. Once you’ve mastered and practiced the skill, you can build a portfolio and start pitching clients. All of that takes time and effort, but the cost is relatively low.

•   Potential salary: $92,750 per year

•   Qualifications: Bachelor’s degree in computer science or web development

3. Freelance Web Designer

Web design is a skill set you can market as a freelancer, providing your services to multiple companies that need help with the usability and aesthetics of their sites. You can focus on helping design websites from scratch or on troubleshooting and/or redesigning existing websites, or offer a combination of both.

•   Potential salary: $72,500 per year

•   Qualifications: Technical and design skills, certifications

Recommended: 11 Benefits of Being an Entrepreneur

4. Consultant

If you’re wondering what kind of business to start, you might think about consulting in an area you’ve already worked in, like human resources, management, IT, or operations. You can set your own hours, potentially charge more than you earned as a full-time employee, and pick and choose the projects you’ll enjoy the most.

•   Potential salary: $122,000 per year

•   Qualifications: Undergraduate degree, work experience, certifications

5. Graphic Designer

Starting your own graphic design business is another easy option for people who have the talent and experience. If that’s you, consider launching a website with some portfolio pieces and then pitching potential clients. If you’ve already been a graphic designer for a company, you likely already have everything you need to get started.

•   Potential salary: $64,700 per year

•   Qualifications: Bachelor’s degree in graphic design, technical skills, certifications

6. Life Coach

Life coaching can be an extremely satisfying business. You can pick a niche you’re passionate about, like career changes, productivity, health and fitness, or some other idea you find compelling. Getting certified as a professional coach may increase your clout and marketability. While that training probably won’t be free, it might be a good investment. You might also be able to get financing to help cover your tuition.

•   Potential salary: $30,000 – $100,000 per year

•   Qualifications: No formal education requirements

Recommended: Personal Loans vs Business Loans: Which Is Right for You?

7. Tailor and/or Designer

Whether sewing has been a life-long hobby or you picked up the skill more recently, you may be able to turn that interest into a business. You can specialize your services in any number of ways, like making alterations, designing custom home decor like curtains and pillows, or creating hand-sewn crafts to sell.

•   Potential salary: $35,430 per year

•   Qualifications: Sewing skills

Recommended: Creative Ideas to Make Extra Money at Home

8. Resume Writer

Resume writing is always in demand. If this is something you have a knack for, you can either find clients on your own or freelance for a resume agency. While the salary isn’t crazy high, you may be able to earn more if you specialize in a certain industry.

•   Potential salary: $37,000 – $65,500 per year

•   Qualifications: Bachelor’s degree, strong editing and writing skills

9. Online Used Book Seller

Selling used books online can be fun as well as lucrative for bibliophiles. It does involve some startup costs since you’ll need to stock up on inventory, but sourcing inexpensive books from places like thrift stores or yard sales can be fun, too. Once you make your first few sales on a site like Amazon or eBay, you can reinvest some or all of the profits to keep your inventory growing. At some point, you might explore getting a small business loan to grow your enterprise.

•   Potential salary: $40,000 – $60,000 per year

•   Qualifications: None

10. Interpreter or Translator

If you’re fluent in multiple languages, you can utilize those skills as an interpreter or translator. This is work that can often be performed from the comfort of your own home. Global businesses may not have a full-time need for translation services, so you may be able to step in and help them as a contractor.

•   Potential salary: $57,090 per year

•   Qualifications: Proficient in language, certifications

11. Pet Walker and/or Pet Care Provider

A pet walking or pet care business could provide a big market in many locations. Once you land your first few clients, you can then focus on getting referrals from those successes.

•   Potential salary: $30,000 – $35,000 per year

•   Qualifications: Love for pets!

12. Online Course Creator

Creating an online course is a fun way to share your knowledge about topics or skills you’re passionate about. There are many course platforms to choose from. All you need to do is create one or more videos and upload them to the teaching platform. Then simply set a price and, ideally, you’ll soon make some sales.

•   Potential salary: $82,499 per year

•   Qualifications: Subject matter expertise, technical skills

Recommended: Conventional Business Loans vs. SBA Loans

13. Digital Download Provider

Creating and selling digital products (like videos or ebooks) is an easy business to set up, plus it becomes increasingly passive as you build up your library of products. From artwork to educational products, you simply upload your creations to your preferred platform so future customers can find your work.

•   Potential salary: $50,000 per year

•   Qualifications: Creativity, experience in digital sales, technical skills

14. Landscaper/Garden Care Professional

Gardening and landscaping have become increasingly popular in recent years. If you’ve discovered that you have a green thumb, consider launching a landscaping or garden care business to help your clients maintain beautiful yards all year long. Explore startup business loans to help finance new equipment if you need it.

•   Potential salary: $35,600 per year

•   Qualifications: Experience and training

15. House Cleaner

Cleaning houses is a service that’s in demand in just about every city and town across the country. Decide what particular types of services you’ll offer and collect the necessary supplies. Also consider getting a general liability insurance policy to protect yourself and your new business since you’ll be in other peoples’ homes.

•   Potential salary: $30,000 – $44,000 per year

•   Qualifications: Interpersonal skills, cleaning skills

16. Handcrafted Goods Seller

If you have an artistic knack, consider opening an online shop to sell your own handcrafted goods. You can launch your own website or list your items for sale on an existing platform. You can either build up a stock of inventory first or opt for a made-to-order business model, which can help you save on startup costs.

•   Potential salary:

•   Qualifications:

Recommended: Opening a Business Bank Account

17. Mental Health / Wellness Coach

A mental health or wellness coach is a professional who helps individuals improve their overall well-being by guiding them toward healthier habits, stress management, and emotional resilience. While they do not diagnose or treat mental illnesses like therapists, they provide support through goal-setting, motivation, and personalized strategies to enhance mental and emotional wellness.

•   Potential salary: $37,000 – $86,000 per year

•   Qualifications: No specific training requirements

18. Interior Designer

It’s easier than ever to launch your own interior design business, especially if you have some relevant design experience (your kitchen makeover!) to include in an online portfolio. There are a number of different services you might offer, like home staging, product curation, or online design plans. Consider picking a particular niche or style when you first get started so you can attract your ideal client.

•   Potential salary: $72,000 per year

•   Qualifications: Bachelor’s degree, experience, certifications

19. Tutor

You can start a tutoring business in person, but online tutors are also popular. Pick a subject you’re knowledgeable about, like math, language arts, or English as a second language. There are plenty of online platforms through which you can market your services, or you can network to find students in need of a tutor.

•   Potential salary: $42,000 – $60,000 per year

•   Qualifications: Experience, skills, certifications

Recommended: 15 Side Hustles With Low Startup Costs

20. Virtual Assistant

Starting your own virtual assistant business gives you flexibility in the type of work you do, as well as when, where, and how much you work. You can offer a range of remote services as a virtual assistant, including managing schedules, sending emails, or even handling marketing activities.

•   Potential salary: $24,000 – $51,000 per year

•   Qualifications: Skills and certifications

21. Childcare Provider

Opening a home daycare center is a more involved small business idea, but there’s definitely a need for this service. Be sure to check your area’s local rules and regulations about opening an in-home daycare center. It may be helpful to write a business plan to keep track of everything you need to do. Alternatively, you could start small by just babysitting or nannying for one family, or even working as a parents’ helper.

•   Potential salary: $30,000+ per year

•   Qualifications: High school diploma, experience, training

Recommended: Mompreneurs in 2025: A Comprehensive Survey

22. Smart Home Installation Specialist

A smart home installation specialist is a professional who sets up, configures, and integrates smart home technology to enhance convenience, security, and energy efficiency. They may work independently, for tech companies, or with home automation service providers, helping homeowners create customized, efficient smart home ecosystems tailored to their lifestyles.

•   Potential salary: $54,600 per year

•   Qualifications: Technical and electrical skills

23. Flipper/Goods Reseller

Flipping — finding and reselling or even fixing up and reselling — used items for a profit can be a great business idea if you love bargain-hunting at thrift stores, yard sales, or even clearance shelves. To get started with no budget, you can even flip your own unwanted items from your home on an online auction site. As you make a little money, you might want to start expanding your inventory.

•   Potential salary: Up to $36,000 per year

•   Qualifications: None

Steps to Launching a Small Business in 2025

Launching a small business in 2025 requires careful planning and execution. Below are the steps to launching your business in 2025:

•   Start by identifying a profitable business idea and conducting market research to understand demand and competition.

•   Create a solid business plan outlining your goals, target audience, and financial projections.

•   Register your business, obtain necessary permits, and choose the right legal structure.

•   Secure funding through personal savings, business loans, business lines of credit, or investors.

•   Build an online presence with a professional website and social media marketing.

•   Network with industry professionals and potential customers.

•   Finally, launch your business, continuously refining operations and strategies to adapt to market trends and customer needs for long-term success.

Essential Tools and Resources for Small Business Owners

Small business owners need essential tools and resources to streamline operations and drive success.

Accounting software like QuickBooks or FreshBooks helps manage finances, while project management tools such as Trello or Asana improve organization. A strong online presence requires a website builder like Wix or WordPress and social media marketing tools like Hootsuite.

Customer relationship management (CRM) software, such as HubSpot or Salesforce, enhances client interactions. Secure funding through small business loans, grants, or crowdfunding platforms. Utilizing these resources helps businesses operate efficiently and grow.

Recommended: 15 Types of Business Loans to Consider

The Takeaway

Starting any new business takes some work, but the rewards are often worth it. As you get more involved in a new business — and even as it gets more profitable — you may find you need to put more resources into it.

If you’re seeking financing for your business, SoFi is here to support you. On SoFi’s marketplace, you can shop and compare financing options for your business in minutes.

With one simple search, see if you qualify and explore quotes for your business.

FAQ

What are the most profitable businesses in 2025?

In 2025, profitable businesses include tech services like AI consulting, e-commerce, health and wellness coaching, sustainable products, digital marketing agencies, virtual events planning, subscription box services, and mobile app development. These industries offer growth opportunities driven by technological advancements, consumer trends, and emerging market demands.

How can I start a business with little money?

Low-cost small business ideas include freelance writing, social media management, tutoring, and virtual assistance. These businesses require minimal upfront investment and can often be started from home with just a computer and internet connection.

What small business ideas can be run from home?

Small businesses that can be run from home include freelance writing, graphic design, online tutoring, virtual assistance, e-commerce, and social media management. Other ideas include blogging, digital marketing, transcription services, and consulting. These businesses typically have low overhead costs and can be scaled as they grow.

What industries are expected to grow in 2025?

Industries expected to grow in 2025 include technology (AI, cybersecurity), healthcare (telemedicine, eldercare), renewable energy, e-commerce, and financial services (fintech). The green energy, mental health, and remote work sectors are also anticipated to thrive.

What are the first steps to starting a successful small business?

The first steps to starting a successful small business include conducting market research, creating a detailed business plan, securing funding, and choosing a legal structure. Next, register your business, obtain necessary licenses, and set up your financial systems. Finally, create a strong brand and marketing strategy to attract customers.

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SoFi's marketplace is owned and operated by SoFi Lending Corp. See SoFi Lending Corp. licensing information below. Advertising Disclosures: SoFi receives compensation in the event you obtain a loan through SoFi’s marketplace. This affects whether a product or service is featured on this site and could affect the order of presentation. SoFi does not include all products and services in the market. All rates, terms, and conditions vary by provider.

This content is provided for informational and educational purposes only and should not be construed as financial advice.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.


Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

SOSMB-Q125-012

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