How to Finance a Business: 4 Funding Options

• March 6, 2022
• Richard Willis

The age-old saying “spend money to make money” often turns out to be true. After taking the initial steps, such as deciding on a business idea, browsing businesses on sale, researching the market, and creating a value proposition, you’ll need the finance to set up the company. So what are the funding options? Let’s take a look at 4 options to consider.

1. Self-Funding

If the expenses you’ve projected are within a manageable range, you may be able to fund the business from your pocket. This option will most likely require you to take funds from your personal savings, using your credit card, or even asking your family and friends for donations. However, there are two things to keep in mind when taking this option into consideration:

• This will allow you to retain full ownership over your business
• There’s a risk of losing personal savings

2. A Small Business Loan

Securing a small business loan is another way to get the necessary startup funds. There are a few things you should prepare before applying to banks and credit unions, such as creating a business plan and a value proposition, determining your financial projections for the next several years, and an expense report. Most banks will require these documents in order to consider your application. When deciding which offer to take, make sure to look over all the pros and cons and find the lowest rate and the best terms and conditions that suit your needs.

3. Crowdfunding

Crowdfunding is an excellent option for those who have an idea that can receive a lot of support. So if you believe that your business could gain supporters and fans, crowdfunding can be a good way to gain funding. There are several different platforms for it, such as Patreon, Kickstarter, Crowdfunder, and Indiegogo. There, you’ll be able to pitch the idea or products and request financial backing. If people like your idea, they can donate money in exchange for a discount or a free item or service. This funding option will allow you to maintain full ownership of your company and receive support in early stages.

4. Venture Capital

Another way to fund your business is to raise venture capital from investors. The process of raising capital is not the fastest because it involves investors getting to know you and your business before deciding to invest. So if you need a quick way to raise money, this may not be the best option for you.

Bottom Line

At the end of the day, only you know what your company’s needs are. You can pick the best option for you by weighing both rewards and risks of each option and taking your personal finances, predicted costs, and expenses into consideration.