Lesson B100.5 · Business 100: Start Right
Paying for the start without betting the house
5-minute read · Figures checked October 2026
Photo: RDNE Stock project / Pexels, Pexels License
The short answer
Pay for the start with cash you've saved, and start at the size that cash covers: one service line, rented or used equipment, side work first. Most banks and many equipment lenders want about two years of business history, so a brand-new business has few loan options anyway. If you do borrow, the loan has to pass all five Borrowing Rules. Never start with a merchant cash advance, a credit card cash advance or money from your retirement account.
Cash first
Save a set amount from every paycheck into its own account. Start with one service line. Rent or buy used. Let the first season's profit buy the next machine.
If family offers money, decide together whether it's a gift or a loan. If it's a loan, write down the amount, the payments, any interest, and what happens if the business closes. Both of you sign.
Example. Tomas has $12,000 saved toward the $40,650 plan from lesson B100.4, a gap of $28,650. Saving $1,200 a month from his pay and side jobs, he'd close it in about 24 months. Or he trims the plan: keeps his job another season, rents the melter, does side work by hand and starts smaller in spring. (Made-up numbers.)
What lenders do with start-ups
| Who | Time in business | Other published terms |
|---|---|---|
| One large bank's guide | 2 years or more, longer for volatile or cyclical industries | Earnings above the yearly loan payments |
| Three equipment lenders | 2 years or more | Two list credit scores of 640–650 or higher; one takes no start-ups |
| Another equipment lender | 2+ years helps | A credit score of 600 or higher helps |
| SBA-guaranteed loans | No SBA minimum | At least 10% equity from you for a start-up |
Lenders want to see your own money in the deal; SCORE puts it at 10%–25% of the amount needed. Owners of 20% or more of a business generally guarantee an SBA loan personally, and other lenders often ask for the same. A personal guarantee means that if the business can't pay, you will.
The five Borrowing Rules
If you borrow, it must pass all five, every time:
- It pays for something that earns money: equipment or a vehicle the business uses, property, or the short gap between finishing signed work and collecting for it. Never losses, back taxes or personal spending.
- Your own numbers show it pays for itself with room to spare. Lenders often look for $1.25 of cash flow for every $1 of payments; treat that as your floor.
- The payment fits your slowest months, not your best ones.
- It's paid off before the equipment wears out, and you know how you'd keep paying if work stopped for a season.
- You know the whole cost before you sign: the APR, every fee, the total of payments, any prepayment penalty, the personal guarantee, and what the lender can take.
In pavement work, the slowest months can bring in nothing. A winter payment comes from cash you set aside in July.
Never: merchant cash advances or other daily-debit financing; borrowing to cover a loss; cashing out or borrowing from retirement to start or rescue a business.
Different approaches
Where respected teachers differ
Ramsey's EntreLeadership teaches that the right amount of business debt is zero: build cash, be your own line of credit, and pay cash, rent or buy used for equipment. Many owners finance equipment under strict rules. The National Pavement Maintenance Contractors Association (NPMCA) teaches cash-first, and if you borrow, the five Borrowing Rules.
Your Move
Do this week
- Write your startup total from lesson B100.4 and the cash you have. The difference is your gap.
- List how you'll close the gap with cash: monthly savings, side-work profit, selling something, trimming the plan. Put a date on it.
- If family money is part of it, write the terms down and both sign.
- If you're weighing a loan or financing offer, run it through all five Borrowing Rules on paper. If it fails one, walk away.
Log it: I wrote my funding plan.
Common questions
Can I get a business loan with no business history?
It's hard. Most banks and many equipment lenders want about two years. SBA sets no minimum time in business but expects at least 10% equity from a start-up owner, and some equipment lenders say they work with start-ups, so ask each one directly.
Are there grants to start a sealcoating business?
Rarely. The SBA says it does not provide grants for starting or expanding a business, and the FTC says no government agency will demand that you pay to get a grant. Don't pay up-front fees to anyone who promises one.
Can I put startup costs on a credit card?
Not as a loan: a balance carried into winter is a payment with no income behind it, and a card cash advance is never part of the plan. Ramsey teaches that nobody needs a credit card. If you keep one, treat it like a debit card: charge only what's already in the bank and pay the full balance every month.
Watch out for
- Merchant cash advances. The factor rate applies to the whole amount and doesn't fall as you repay, and payments come out of your account as often as every day. The FTC's case against one advance company ended in 2021 with a $9.8 million payment over misstated funding and debits that kept coming after payoff.
- Grant offers by phone, text or social media. The FTC says the government won't contact you out of the blue about a grant, and paying for one with a gift card, wire or crypto is always a scam.
- A personal guarantee you didn't read.
- Counting on a cost disclosure. Kansas and Missouri require many non-bank providers to disclose the total dollar cost of business financing of $0.5 million or less. Banks are exempt, and so are leases and loans used to buy the equipment that secures them, so get every number in writing and read every line before you sign.
Free help
- SBA Lender Match
- Small Business Development Centers and SCORE: free help with a funding plan
- CDFI Fund: community development lenders, including some credit unions and loan funds
- FTC: Government grant scams
Members: tools for this Move (after sign-in)
- SBA resources in the Finance Center: /member-resources/sba. NPMCA does not originate SBA loans and does not promise an approval.
NPMCA may be paid by partners listed here. The lesson above is the same either way.
Free practice
Lesson check
5 questions on this lesson, one at a time, with the answer and the reason after each. Pass with 4 right, including every must-know question.
This is general education, not tax, legal, investment or insurance advice. Rules change and every situation is different. Check the sources below, and talk to a qualified professional before you act on it.
Sources
- PNC (one bank's guide): Business lending guide
- Bank of America: Factors that impact loan decisions; Bankrate (as reported): Bank of America business loans
- Equipment lenders' published terms: Ascentium Capital, Crest Capital, Ameris Equipment Finance, Currency
- NAGGL: SOP 50 10 8.1 update; eCFR: 13 CFR 120.160
- Lender summaries of SBA rules: Pioneer Capital Advisory; Doeren
- SCORE: The 6 Cs of business credit
- SBA Office of Advocacy: Interest rates issue brief; FTC: Yellowstone Capital case
- Kansas Legislature: SB 345 (2024) summary; Missouri Revisor: RSMo 427.300
- SBA: Grants; FTC: Government grant scams
- Ramsey Solutions: 7 Tips for How to Run a Business Debt-Free; EntreLeadership: Don't risk it all