Top 7 Startup Funding Options For Entrepreneurs

If you have a business idea and you are ready to seek funding to bring your idea to life, you have many options to choose from to finance your ventures.

While the obvious startup funding options include tapping into your personal savings, applying for credit cards, and pitching to outside investors, there are many OTHER options that you might not be aware of.

Recent regulatory changes have brought alternative funding options to entrepreneurs to make startup funding MUCH more easy.

Here are 7 ways to fund your startup today.

#1: Friends and family

Raising capital from friends and family for a startup business can be a great first step. The terms of your arrangement are generally more favorable, and you may not have strict terms and conditions as you will with professional investors.

The major risk is that you could hurt your relationships should the business not deliver results or you never reimburse your friends and family for their investment. It’s best to set clear expectations when seeking startup finding from your friends and family to ensure you don’t lose the people you’re closest to throughout your startup experience.

#2: Crowdfunding

Crowdfunding has evolved from pre-selling a $20 product online to early-adopter customers to now selling shares of your venture to investors around the world. While the competition is high, new equity crowdfunding platforms such as Seedinvest, CircleUp, and Fundable allow both accredited and non-accredited investors (each site has different requirements) to invest into actual shares of startups that can someday turn into real wealth.

These win-win platforms open many successful startups up to capital from everyday people, not just the professional investors or banks of the past.

#3: Accelerators and incubators

Accelerators and incubators are groups designed to promote startups. They can provide crucial startup benefits, such as mentors and workspace. Often, these groups also provide financial assistance to startups. Notable accelerators include Y Combinator, 500 Startups, and TechStars, though there are thousands of others.

You might have an accelerator or incubator in your community that you can pitch your startup business idea to. Be prepared to offer an equity stake in your company if seeking financial support from one of these groups.

Startup businesses can benefit from using an accelerator or incubator because you often get input from business owners who have been there. They’ve been through the difficult process of starting a business and can serve as an adviser to your company as you work to grow.

#4: Angel investors

Seeking funding from an angel investor means seeking out individuals who have capital they can directly invest in your company. Angel investors are often business owners or executives that have a high net worth and can afford to invest a large chunk of money in your business.

When you start an angel investor relationship, you’ll often have a closer personal relationship with your investor than you would going with a loan or venture capitalist. This means you get added mentorship to help grow your business if you want and need it.

You will need to be prepared to offer a stake in your company to an angel investor by issuing convertible debt or equity securities. Explore angel investors on AngelList and Gust.

#5 SBA Loans

The Small Business Administration (SBA) works as a third party between small businesses and lenders to ensure favorable and fair loan terms. While SBA doesn’t directly offer loans to businesses, they do serve as an important intermediary to make sure small businesses are protected.

Using the SBA’s network of small business loan providers makes it easier for you to find the support you need for your business. You can search the lender network for an organization that will provide startup funding to your business in a way that works right for you.

Some SBA lenders offer pre-approval in as little as 48 hours and loan closing in as little as 14 days from application. While SBA loans feature startup-friendly terms and predictable interest rates, SBA lenders do require good credit scores (650+), moderate collateral and down payments, and detailed application to get approved.

#6 Retirement Savings

A rollover for business startups (ROBS) is a way to invest funds from your retirement account — like a 401(k) or individual retirement account (IRA) — into your business without paying early withdrawal penalties or taxes. A ROBS isn’t a business loan or a 401(k) loan, so there’s no debt to repay or interest payments to make.

If you have at least $50,000 in your retirement account and you would rather invest into your own venture than the public stock markets, the ROBS option is a good bet for funding your venture.

#7 Government Grants

If you are a technology-based company there is a good chance you have heard of government grant programs as a means to fund a new product or service. Agencies like the SBIR request applications from for-profit companies for grants, typically starting at $150,000, with the opportunity to get larger grants over time as the company proves it can develop and commercialize the technology with the SBIR money.

If you are building technology and believe that government support in the form of grants, or being a customer, would help you, check out SBIR grants today.

Get Help Today To Finance Your Business

Do you need help securing funding for your startup or growing business? Pinewood Consulting helps entrepreneurs prepare their Quickbooks finances, financial models, and business plans to help them secure startup capital from banks and investors.