10 Funding Sources For Startups - Small Business Money Tips

When you are about to open the business of your dreams, one insurmountable obstacle will appear - this is obviously funding. It demonstrates commitment but is a finite resource. Loans can be a great tool to fund your business, however the debt amount might place you under hassle.

You for sure need a mix of different funding sources to build your equity financing up to balance out. Here is my list of top sources in a prioritized order, along with some helpful tips for each. So, let's dive in and take a look at the top 10 funding sources for startups!

1. Angel Investors

The starting point for most companies comes from angel investors, who are private wealthy individuals who put in capital to startups in exchange for ownership equity or convertible debentures. Not just with cash, but with mentorship & network, too. This source of startup funding can significantly boost your business plan.

2. Friends and Family

This is another slippery slope of borrowing from friends and family. While it’s a quick way to secure working capital, it can strain personal relationships. Ensure you have clear terms and a solid business plan to avoid misunderstandings.

3. Small Business Grants

Government and private grants provide funding for your startup without the need to repay. This is perfect for business designs related to technology, health, and education. The applications are quite a systematic process for obviously anyone, but the result pays.

4. Loans or Lines of Credit

Bank and Credit Union Loans/LoansTraditionally, bank or credit loans are some of the common startup financing methods. This form of debt financing will require a strong personal credit score and sometimes collateral. The borrower has to return this along with the interest - but it represents a substantial amount in terms of working capital.

5. Venture Capital

While venture capitalists (VCs) invest in high-growth-potential startups for equity. This is a good option if you have clear plans of how to grow your business VCs bring expertise, but they also seek substantial control and high valuation.

6. Bartering

Bartering is the exchange of goods for other goods or services without using money. This can save cash flow and lower expenses. For instance, offering your services in return for office space can be a practical way to conserve funds.

7. Partnership

Forming a partnership can provide additional capital, skills, and resources. Partners share investment, expense, and profits, reducing the individual burden. 

8. Bootstrapping

Bootstrapping refers to using personal savings or returns from the business for growth. A slower but with no debt, retains control approach. Keeping the cash flow and expenses in control is crucial.

9. Crowdfunding

Platforms such as Kickstarter and Indiegogo allow people to pitch products or services in exchange for start-up money from the masses. This funding option requires a compelling campaign to attract backers. This is a very good way to prove the concept and get customers at the same time.

10. Incubators and Accelerators

They offer startups with seed funding, mentorship, and the guidance. These programs typically offer seed investment and help refine your business plan. They are excellent for networking and rapid growth.

Conclusion

The beauty of looking at these sources is that it lets you spread your risk and leverage multiple types of strengths. Each option has its respective pros and cons. Select the ones that work with your business needs and goals best. Besides, try combining multiple sources and make your startup money move wisely!